The IRS has stepped up the number of audits of small businesses. Perhaps it's a result of the fact that it requires more resources to audit large corporations than small, mom-and-pop businesses, and that it has decided to pick the fruit where it can, since picking higher up is much more difficult.
So be prepared for an audit while preparing your tax returns. For instance, don't flag an audit by committing the obvious signs of fraud, like overstating noncash charitable deductions, business use of vehicle, meals and entertainment. If you do, you will end up paying twice as much in taxes when audited, and run up costly accounting fees in preparing for the audit.
There are two things everyone has to do: pay taxes; and die. Unless you are a genius and have figured out a way to avoid the latter, be honest when preparing your tax returns. You'll save thousands of dollars in the long run and sleep a lot better. And you will avoid jail time, too: are you aware of the fact that if your understatement exceeds 25%, that allows the the IRS to audit you as far back as your date of birth?!
William Brighenti, CPA
