If you run a small business you are likely in some type of constant fear of a government audit. I wanted to help lighten your mental burden. Here is the absolute truth:
If you run a business you will be audited at some point.
No matter what the government’s position on this is, businesses are just huge juicy targets when it comes to an audit. The reason for this is because the government has a few special rules tucked up their sleves when it comes to taxes.
You Are Wrong [Always]
Quite simply the tax court system is quite backwards. You are actually guilty until you prove yourself less guilty. You are never innocent when tax court gets involved, just shades of how much money they are going to soak from you.
Even if you kept every single record perfectly, you did something wrong. The government employs legions of tax pros to make sure they find that one mistake to hammer down on you. The rules change all the time and the government even has a special rule to declare you guilty even when you are provably not!
What can you do?
The truth is, you cannot prevent the government from auditing your records and finding something wrong. What you need to do is ensure you are not lying or making things up on your returns, as well as ensure you have a budget set aside for when the government decides to catch up with you. Since receipts fade and records can end up missing over time you are very likely to have expenses disqualified on you. Just make sure you are ready before hand so it isn’t such a shock.
Since you now know the government is out to get you, there is no reason to be afraid of them. Just be cool and detached because there is/was nothing you could do to prevent it.
The only thing we have to fear is fear itself – Franklin D. Roosevelt
Plan for the future
Planning and preparation is the most effective means of being ready for an audit. Don’t misplace your records. Keep paper copies of everything in case you have a computer failure. Copy your records and store the copy off-site to ensure you won’t loose them in a fire. Release yourself from fear by being prepared and embracing the pains that our government inflicts upon people.