It’s almost Halloween, and this season has me thinking about vampires. (My family all dressed as vampires last Halloween.) Here are the garlic, holy water, and crucifix to the IRS’s Dracula – three things to keep the IRS away:
- Keep good records. I know I’ve said it before, but there’s no better way to prevent problems with the IRS. Keeping good records not only helps you out if you are audited, it also helps avoid an audit in the first place. Mismatched numbers and missing paperwork will often trigger a second look from the IRS.
- Check your 1099s. It’s easy to just tuck your 1099s in a bottom drawer and not think about them. But if you forget to report something on a 1099, or if a client submitted an inaccurate 1099 and you failed to ask for a corrected one, then you could be in for an audit. The IRS has a tracking system for 1099s, so it’s wise to create your own system for tracking and recording your own 1099s.
- Don’t mix business and personal. This includes keeping separate bank accounts, but it’s much more than that. Deducting expensive lunches with a friend who’s also a client, taking a vacation with your family and a client’s family, or counting a hobby as a failed business venture, will all raise eyebrows at the IRS. Although technically you could deduct these things, your life will be much easier if you keep business and personal separate.