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David P. McCabe,
WMCP®, ChFC®, CLU®
Financial Planner
Nathaniel D. High, RICP®
Financial Planner
Nicholas J. Over, CFP®
Financial Planner
Sara E. Martin
Client Relations Manager
Jennifer A. McCabe
Client Relations Specialist
jennifer.mccabe@prudential.com
Centuria Financial Group
2333 Baltimore Blvd Suite B
Finksburg, MD 21048
Phone: 443-952-7232
January/February 2023
Preventing and Surviving a Tax Audit
Recognizing the most common audit triggers may help you avoid them. But, if your business is selected for an audit, having all your information organized, with help from your tax advisor, can get you through it.
Red Flags
The following are frequently triggers:- Not reporting all your income, especially if you receive cash payments.
- Failing to comply with employment taxes. You’re responsible for paying your share of FICA and Medicare taxes on your employees’ wages, in addition to withholding the employee’s portion of these taxes.
- Mixing business and personal expense deductions.
- Claiming losses or not showing a profit year after year. Failing to ever report a profit means the IRS may question whether you really have a business. Without profit, your business may be classified as a hobby.
Survival Gear
Organization is the key to surviving an audit. It starts with keeping accurate and complete records.- Business expenses must be common in your industry and necessary to run your business. Examples include office supplies, computer equipment, printer paper and similar items.
- Track cash flow, income and expenses.Consider using apps to upload receipts, keep track of mileage, and generate reports.
- Make sure you have supporting documentation, including cash register tapes, deposit information for cash and credit sales, invoices, receipts, canceled checks, proof of electronic fund transfers (EFTs), and account statements.
- Open a checking account and credit card strictly for your business.
Be prepared: During an audit, the IRS will want to see bank statements, a balance sheet, income statement, tax returns, loan and lease agreements, and proofs of purchase for equipment and assets. Your tax advisor can help you assemble the necessary documentation.
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Centuria Financial Group is not affiliated with Prudential Financial. Centuria Financial Group sells insurance products of Prudential Financial's affiliated insurance companies in addition to products of non-affiliated insurance companies. Centuria Financial Group is authorized to sell and service certain insurance products of Prudential Financial companies as well as use this material. Centuria Financial Group and its representatives do not give tax or legal advice. Please consult with your own advisors regarding your particular situation. Offering financial planning and investment advisory services and programs through Pruco Securities, LLC (Pruco), under the marketing name Prudential Financial Planning Services (PFPS), pursuant to a separate client agreement. Offering insurance and securities products and services as a registered representative of Pruco, and an agent of issuing insurance companies. 1-800-778-2255. Sara E. Martin and Jennifer McCabe are employed by David McCabe and not The Prudential Insurance Company of America or its subsidiaries.
This newsletter is general educational information provided by a Prudential Financial Professional and is not intended to market or sell any specific products and services, but rather provide general information about the subject matter covered only.
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