One of the famous political faux pas of President Bush the Elder was announcing “read my lips, no new taxes” during the presidential debates and then promptly raising taxes when he was elected. The current president Bush is a better politician than his father. Rather than raising taxes, he has boosted the IRS budget for enforcement. No new taxes just more audits.
Although you have always thought that the IRS was looking over your shoulder, the reality is that there hasn’t been much risk of getting audited for the past ten years. Between 1996 and 2003 the number of IRS audits dropped from 5.3 per thousand business tax returns to just 2. This boost in the audit budget should be a wake up call for businesses that might have taken liberties with their tax returns.
Take your taxes seriously (but take all of your deductions)
As the person who puts their name (and their butt) on the line, you need to take your business tax return seriously. Be careful. Be specific. Avoid the temptation to guess. Round numbers attract attention. And provide backup for anything where there could be a question. But don’t be shy about taking the deductions that you are entitled to.
Trust your CPA not your instincts
We all have strong opinions about what the tax law should be. Perhaps your dog cares. Maybe your mother cares. But trust me, the IRS doesn’t care. If you are at all unsure about how to interpret the rules and regulations ask your accountant or a tax attorney. Trusting your instincts on something as arcane as tax law will do nothing but get you in trouble.
And keep and eye on AllBusiness.com
Until the government cancels business income taxes (when what freezes over?), AllBusiness.com will work to give you the best, most timely and most comprehensive advice on business tax strategies.