Bookkeeping is not a priority for many small businesses. Few business owners get thrilled at the idea of sitting in front of a computer and processing. However, ensuring that your business complies with the latest IRS rules is a tedious, full-time job.
A large number of business owners will not consider engaging bookkeeping and accounting services if the IRS were lax. Unfortunately, the federal agency is anything but lenient.
In 2016, the IRS audited 1.2 million tax returns. Only 37,000 of examinations resulted in additional refunds to the taxpayer; 99.7 percent of the time the firms audited by the IRS did not receive any monetary benefit. Do not appear on the IRS’ audit radar if you are a small to midsize business owner. You will lose money and dozens of hours complying with the auditors.
What Triggers the IRS to Investigate Your Business?
Although the criteria the IRS uses to launch an investigation into a business’ operations is a closely guarded secret, your accounting firm can tell you about some common triggers:
- Discrepancies in financial statements and incorrect tax filing: Usually happens when you decide to become your own accountant, instead of hiring engaging professionals for bookkeeping services
- Repeated losses: Reporting a net loss in more than two of the last five fives
- Unreasonably high salaries: Especially, if the beneficiaries are shareholders who also happen to be employees
- Excessive deductions: There is only so much you can deduct for meals, travel, and entertainment
- Excessive charity: Large charitable contributions can alert the IRA, and you may be investigated for tax abuse
- High income or assets: The probability of an audit goes up.
An accounting services firm can protect you from an IRS audit, but that should not be the only reason to invest in bookkeeping services. Your business can profit immensely from professional consultation.
Cheapest Road to Professional Bookkeeping Services
Many small to midsize businesses can choose any of these four methods to maintain their books:
- Be your own accountant
- Hire a family member to stay on top of the finances
- Hire an in-house accountant
- Hire an outsourced professional firm
Methods 1 and 2 are cost-effective in the short run but in the long term you will be running a risk. Keeping it in the family without professional supervision increases the chances of a discrepancy creeping in and the IRS slapping you with a penalty.
In-house bookkeepers can protect your firm from audits, reduce your stress, and improve your financial decisions. You can save a lot in tax savings. Almost all large firms have in-house bookkeepers on their payroll. Many times small to midsize business cannot afford the services of an in-house accountant.
That leaves us with outsourcing which promises professional bookkeeping services without the expense of an in-house accountant.
In the absence of an in-house accountant, an outsourced accounting firm is the best way to go. Not only will you receive professional guidance, but it will be at a fraction of what a full time accountant would cost.
CFO Strategies to the Rescue
We have been providing on-demand bookkeeping, controller, and CFO services to New Jersey and New York businesses for many years. Hire us for:
- Accounting services
- Cash management
- Financial reporting
- Outsourced Bookkeeping Services
Call us at 732-991-7974 and talk to our team of CPAs and senior professionals. Best of all, we work on site at your place of business.