Decrease Your Chances of Being Audited

Image via Wikipedia

According to IRS statistics your chances of being audited as a Schedule C Sole-Proprietorship are 3-4%, compared to an S-Corporation of 0.3-0.4%.  So, your chances of being audited are about 10 times greater as a sole-proprietor.  That sounds like a great reason to set your business up as an S-Corp!

Other ways to reduce your chances of being audited are:

Don’t use round numbers.  For example, don’t put exactly 10,000 miles as your business miles.  That looks completely made up.  Instead take the time to calculate your actual mileage.

File an extension.  Although this has not been substantiated, many people claim that filing an extension will decrease your chances of being audited.

Have your return prepared by a professional.  This will increase the likelihood that your return is prepared correctly and thus decrease the chances of an audit.

Don’t claim that you used your home or auto 100% for business.  This is a red flag because it is very unlikely that it could possibly be true.

File your return on time.  And, if you file an extension, file your return by the extended due date of October 15th (September 15th for Corporations).