Nobody wants their business to be audited by the IRS. However, if it does happen to your business, it helps to know that the IRS examiner often has a narrow focus directed at areas where infractions are very common. Some areas that are high risk are:

• Business loans to the owners that may be disguised dividends.

• Compliance with year-end information reporting requirements.

• Misclassification of workers as independent contractors.

• Business travel and entertainment expense deductions that are personal in nature.

The best way to defend your business against IRS inquiries is to provide thorough documentation to substantiate the legitimacy of the expenditures.

If you’re not sure whether you have the documentation and records to fend off IRS challenges, contact Ellis & Associates, CPAs, P.A. at (410) 256-9298.