- February 15, 2019
- Posted by: admin
- Category: Accounting Advice
Do you have adequate records? In a pest control company tax audit, the IRS agent will ask you to show that the expense was in fact paid. This is where your record keeping policies come into play. If you have kept good records, proving your deductions won’t be a problem. Remember, on most tax matters, the IRS can require you to prove that your deduction is correct. If you can’t do this, the IRS will compute your tax liability based on its view of the question under dispute.
Generally, you will need to keep all records that support items on your tax return for at least four years, since the IRS may challenge your return for up to three years after its due date. However, certain items need to be kept longer. In the event you experience a company tax audit, anything that may support a position on your tax return in the future should be retained until 4 years after that return is filed.
Pest Control Company Tax Audit Example
An example, would be a building that you purchase for $500,000, you then pay $40,000 for a parking lot to be put in. You would want to save the paperwork and proof of payment for the purchase price of the building as well as the parking lot until after you sell the property and report a gain or loss on your tax return.
Pest Control Company Tax Audit Deductions: In order to claim any deduction, a business owner, like any taxpayer, should be able to prove two things: what the expense was for, and that the expense was in fact paid or incurred. A receipt or invoice showing the description and cost of the item, plus a canceled check or credit card charge slip, are two types of documents that prove the amount and purpose of an expense.
In many cases, if you don’t have records of a particular business expense but it’s obvious that you must have incurred it, in an audit situation the IRS will estimate the amount of your expenses and allow you to deduct them. An example would be a retailer who has incomplete records of inventory purchases. Learn more about what you should know if you face an IRS notice.
For more information about protecting your Pest Control Company and maintaining your books contact us.