Business Tax Insights: IRS Audit Mistakes To Avoid

You may be surprised how many businesses we work with that are unaware tax information effecting their business.  This is especially the case if you are suddenly being audited by the IRS.  You’ll find this blog timely if:


  • You use electronic accounting software to track and file your taxes
  • You use credit card statements to substiate business expenses


As a full-service tax preparer, we continually look into tax law changes and what they mean for our business clients.  Whether you are an entrepreneur or a small/medium-sized business, we can help you to make your taxes work in your best interests.


Accounting Software Files Can Be Requested

IRS auditors can request access to your accounting software.  If this request occurs, you will receive a completed Form 4564, Information Document Request (IDR).  For the past decade, the IRS has increased its training of field agents in accounting software audits.  When you are under an audit, the 4564 will specify which year or years you are required to submit.

As a word of caution, some accounting software programs allow all years to be viewed.  This may inadvertently allow a thorough auditor to find inconsistencies or mistakes in other years.  Although you may have passed the audit at hand, they can flag you for an audit for another year they viewed.

Credit Card Statements & Business Expenses

Never take for granted that your credit card statements solidify business expenses.  By law, business expenses may only be legitimized if they are “both ordinary and necessary”.  An often-overlooked mistake in the practice of keeping credit card statements is that they do not itemize purchases.  Rather they only track the merchant name and expenditure amount.  Qualifying the purchase to the IRS under an audit as ordinary and necessary for business may become difficult with credit card statements alone.

Pacific Tax & Financial Group understands the nuances in IRS audits.  We continually help business clients in  Carlsbad, Escondido, Fallbrook, Oceanside, San Marcos, San Elijo Hills, Valley Center, and Vista, California.


Pacific Tax & Financial Group

(760) 471-2040