Tips On How To Avoid A Tax Audit

Tips On How To Avoid A Tax Audit

If you are working with an accountant, it is very likely that you will be offered tax audit insurance in case there will be a need to respond to an inquiry. Tax authorities check tax returns for accuracy which means that if you have made an error or provided misleading information, you can expect a notice from the mail.

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Reasons why your tax returns triggered an audit

  • Your tax returns contain round numbers which is very unlikely to happen in your investment income, charitable donations and other reported deductions. IRS will suspect that you have simply fabricated the numbers. Exert some time and effort in ensuring the accuracy of your tax returns to minimize your apprehensions.
  • Large amounts of deductions that are not associated with the business or line of work can easily raise doubts. Your tax returns can also be subjected to audit if you claim more than 3% of your income went to charitable donations. If you have made donations, make sure to keep the receipts in case IRS asks for supporting documents.
  • If you run a small business from home, you can only deduct a portion of the amount paid for home insurance, utilities, mortgage interests and other expenses. Do not deduct the total amount of expenses as it would be disproportionate to the expenses incurred by the business.
  • Tax authorities have information on how much income an individual earns from a certain line of work or business. If you report a very small income, IRs may suspect that you have misdeclared your income. If there are significant changes in the income from year to year, IRS will think that you are not reporting the income accurately. IRS uses an automated system to check tax returns and certain entries may trigger an audit.

Having a professional to represent you during a tax audit is not mandatory but it helps a lot when you need assistance. However, professional fees can quickly add up which requires a tax audit insurance for protection from the substantial costs. Audit insurance may not eliminate the problem with IRS but it will at least provide some peace of mind.

Importance Of Having An Accountant Liability Insurance Policy For Accounting Firms

Importance Of Having An Accountant Liability Insurance Policy For Accounting Firms

Accountants perform a lot of work relating to preparation of accounts and bookkeeping, taxation, audit, management accounting, tax consultancy, corporate advisory to public listed companies and financial institutions, investment planning and financial advisory to the clients.

They have access to various important legal and financial documents of the clients. They have to be very attentive and careful when conducting their duties. Accountants are responsible for many statutory duties of their clients like filing accurate tax returns, providing correct interpretation and maintain the correct audit practices to eliminate fraud. Getting an accountant liability insurance from a good company will safeguard interests of the accountant from the fines and legal costs.

The investment in accountant liability insurance will safeguard the interests of the accounting firm in case of false investment advice leading to financial loss to the clients, incorrect tax returns, bookkeeping and account errors of the staff, conflict of interest, negligence in audit and failure to identify and report improper business conduct, not following the accounting standards while conducting audit, faulty tax returns, negligence and dishonesty of the employees or employees selling confidential information of the client to third parties, defamation, libel and breach of confidentiality.

The accountants are required to take accountant liability insurance as a part of compliance and to safeguard themselves and their employees. The client usually holds the accountant liable in case of any claims and statutory discrepancies. The insurance saves the interest of the accounting firm in such circumstances. It takes care of all the legal charges and fines to be paid by the accountant.

It is very convenient and easy to get an accountant liability insurance from an insurance provider. You can fill the online application form of the company or get in touch with the sales representatives of the company through the numbers provided. The company will immediately process your application and confirm your policy. The process of renewal is also simple and can be done online. The policy is a tool to take care of your company and employees in case of unforeseen circumstances arising out of negligence or general lapses in duty.