IRS Audits- Are we targeted

Discussion in 'Business Operations' started by K.Carothers, Nov 26, 2004.

  1. K.Carothers

    K.Carothers LawnSite Bronze Member
    Messages: 1,124

    I am new to the business and was wondering if LCO's get audited more frequently. I've never been audited in 18yrs., will this change? What's your experience veterans in the business?
  2. muddstopper

    muddstopper LawnSite Silver Member
    Messages: 2,341

    The IRS usualy picks a certain number of people each year to audit. They are usually chosen at random. Thre are certain thing that you can do that will throw up a red flag and actually make yourself a target for an audit. Taking generous depreciation on equipment for one. Or not showing sufficient income to qualify for other exemptions. I bought some equipment once to develop some property I owned. I showed depreciation on the equipment but I had no income from the property. I didnt have any income from the property because I hadnt sold any of it yet. Since the property hadnot generated any income the depreciation wasnt allowed. I ended up paying back over $7000. I sold the property the next year and then was able to take the depreciation on the equipment. I actually came out better after the audit because of the changes in the depreciation allowances. I was able to depreciate more on the equipment than I originaly tried to deduct so, I ended up getting my $7000 back but, it caused me to hire an accountant to keep from making similar mistakes in the future. Using an accountant is a good way to reduce your chances of being audited. I had used turbo tax in the past but found out that it wasnt the best tool for fileing company taxes. It only does what you tell it to and if you dont know what to tell it you can endup with major problems with the IRS.
  3. walker-talker

    walker-talker LawnSite Platinum Member
    from Midwest
    Messages: 4,771

    My dad (a retired IRS auditer) has always told me it those you don't file who need to worry the most and not those who make false claims on their returns.

    I hope everyone that is not filing read this post!!!
  4. Tvov

    Tvov LawnSite Bronze Member
    from CT
    Messages: 1,157

    I've never been audited, and no one I know in this business (at least who is willing to say) has been audited. I've had late payments to the IRS (which has given my accountant heart attacks!), and had them call me with questions, but I've never had a problem and they've always been polite. This goes the same with the state revenue people.

    The biggest thing that my accountant warns me about is making sure that employee paperwork and deposits are on time and accurate. I believe this is one of the larger "red flags" that the IRS has.

    Actually, I just remembered that a local garden center / supply store was audited about 10 years ago. They spent a lot of time going over paperwork, of course found a few minor things, and the garden center had to pay some small fees. Overall, it wasn't terrible, but the owner said that it cost them a lot in time and headaches.
  5. tiedeman

    tiedeman LawnSite Fanatic
    from earth
    Messages: 8,745

    I had one customer (commerical account) that was audited once, ended up they owed him about four grand.

    BUt like stated above, last time I knew they are choosen by random

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