As a certified public accountant and former Internal Revenue Service agent, I know firsthand the thrills that come along with a tax audit. And more importantly, I understand the eerie feeling when the IRS determines your business owes tax money.
The Dycom Business audits only a small percentage of tax returns. But if your business is one of the lucky few, understanding the appropriate steps to take will determine whether or not your outcome is favorable.
First, it is essential to understand how a tax return is selected for audit. There are many reasons a tax return could be chosen for an audit, including the following.
DIF scoring. Tax returns filed with the IRS are assigned a computerized score, known as a discriminant index function, or DIF, score. The higher the score, the more likely it is for the return to be selected for examination. Although the IRS does not reveal the mathematical formula, factors such as deductions that are greater than reported income can increase the DIF score.
Examination referrals. Audits of a related party can also trigger a tax audit. For example, while auditing the tax return of XYZ Corp., an agent may discover payments were made to ABC Co. As a result, the agent may check ABC’s tax return to ensure these payments were reported. If the income was not reported, the agent may request an audit of the ABC return.
Document matching. In addition to DIF scoring and examination referrals, the IRS matches income reported by the payer on 1099 or W-2 forms to the payee’s individual tax return to ensure the income is reported.
Following are four small-business strategies for beating an IRS audit.
1. Dispute the ‘hobby loss’ theory
As an IRS agent, one issue that continued to surface during audits was whether business activity was considered a hobby for tax purposes. According to the Internal Revenue Code Section 183, deductions are limited when an activity is not engaged in for profit. This is known as the “hobby loss rule.”
If business losses have been disallowed due to the hobby loss rule, it is essential to prove the following.
Business profitability strategy. Did the business implement an advertising campaign? Is there a documented marketing plan? Provide the agent with information or plans that outline the business’s plan to increase profitability in subsequent years.
Prior success. Provide evidence that shows the business has had profitable years in the past. If there are factors that may have contributed to recent losses, submit evidence that shows the loss is temporary due to economic downturns, a loss of a substantial client or other circumstances that may be considered temporary.
We’ve all heard the old adage that failing to plan is planning to fail, and this is true when it comes to your business.
What is a business plan?
A business plan is a document that describes your business, its objectives, strategies, target market and financial forecasts. It’s a blueprint to your business’s future.
Business plans can vary enormously in length, style and content, but the key is to ensure the document is realistic, practical and regularly reviewed. It should not only set the direction for your business but act as a reference point for measuring performance. There are no rules about what your plan should cover or the level of detail it should contain, but it’s worth considering the areas in the Business Plan Template especially if you’re hoping to secure finance or to use your plan as a tool for managing and monitoring business performance.
Why do a business plan?
It may seem like a lot of work at the outset, but a well prepared business plan can save you time and money in the long run and help you secure major contracts or funding.
Most importantly, a business plan incorporating a feasibility study will help you determine whether your idea is commercially viable and any issues you need to address or plan for along the way. It will help you:
- apply for finance from a financial institution;
- secure investors, sponsors, suppliers and staff;
- clearly outline your goals and long-term vision;
- determine the commercial viability of your idea;
- examine your business idea from many different angles;
- test your commitment and motivation;
- identify your business’s strengths, weaknesses, opportunities and threats;
- develop strategies to successfully operate and market your business; and
- establish measures to evaluate your business success.
Customer relationship management (CRM) programs have a bad reputation for being overly technical, burdensome to implement, and a chore to use. This can certainly be true of some services, especially for owners of small to medium-size businesses who lack the funds or resources to customize the CRM properly to meet their company’s needs. Salesforce, for example, is popular but not necessarily lightweight or easy to get off the ground.
Client Knowledge At Your Fingertips
Maximize the value of your book of business by keeping client history and documentation in a single, central location. Maximizer CRM makes it easy to gain insight into each clients’ interests and investment preferences, and offer services tailored to their individual needs and manage relationships, rather than records.
Streamline Common Business Practices
Automatically conduct repeatable, best practices for client acquisition and onboarding, plus track trade recommendations to ensure consistency in customer interactions and adherence to regulatory requirements. Industry-specific action plans and templates streamline Know Your Client processes and support compliance around information gathering and disclosure, and follow-up obligations.
Highly Secure, Infinitely Flexible
Maximizer CRM can be installed on-premise or accessed via the web through our highly secure Tier IV Canadian datacenter. Our databases are firewall and encryption-protected and monitored around the clock by intrusion detection services to prevent unauthorized access.
Ideal for investment advisors and experts in retirement and estate planning, insurance and mortgages, Maximizer integrates with Outlook and Word, offers export to Excel, tracks new business and commission opportunities, and can be connected to business critical back office software for a seamless user experience.
The World’s #1 Cloud-based ERP Software
NetSuite is the world’s most deployed cloud Enterprise Resource Planning (ERP) solution, with over 20,000 organizations across 100+ countries.
NetSuite ERP delivers the proven, comprehensive financial management capabilities required to grow a changing, complex business. NetSuite ERP takes your business beyond traditional accounting software by streamlining operations across your entire organization and providing you with the real-time visibility you need to make better, faster decisions.
- Accelerate the order-to cash process by 50%+.
- Slash financial close by over 50%.
- Drive better, faster decision-making with real-time data and reporting, and personalized dashboards.
- Improve workforce productivity with anytime, anywhere access.
- Lower cost of ownership by eliminating upfront and ongoing IT expenditures, and delivering automatic product upgrades.
20,000 Organizations Worldwide… and Still Growing
- Companies Worldwide Manage Their Business with NetSuite
- One System For Your Entire Company
- Software That Grows With You
- Eliminate IT Maintenance and Upgrade Costs
- Better Decisions Faster
“We needed a solution that could scale at the speed of our business, supporting our growing customer base and expansion into global markets. We’ve been impressed by both the power and flexibility of Dycom.”
Create professional documents, spreadsheets and presentations with Ubuntu. LibreOffice is easy to use, packed with the features you need, and it’s completely free.
Open your Office documents
Ubuntu is compatible with Microsoft Office. That means you can open and edit files like Word documents, Excel spreadsheets and PowerPoint presentations, and share them with other users quickly and easily.
Get things done
We understand how important your computer is for day-to-day tasks. Whether it’s finding information online, sending emails to colleagues and friends, or creating and sharing documents, Ubuntu has everything you need to get things done. Fast.
Also available in the Ubuntu Software Centre:Google Docs
Use Google Docs
direct from your desktop.
Adobe Reader allows you to view, navigate and print PDF files.
HomeBank helps you manage your accounts quickly and easily.
Use existing skills to create applications across multiple platforms
In the business world, managing as a coach is a necessity not only for your success, but also for your survival. Business coaching is about helping employees become more effective — and supporting and involving your employees in the process. Coaching influences employee adaptability, productivity, and retention. It helps you make better use of your time.
The definition of coaching, in a business context, has the two following aspects:
Being a coach means that you see and approach the role of manager as a leader — one who challenges and develops your employees’ skills and abilities to achieve the best performance results, and to function as self-sufficiently as possible. In other words, if you manage as a coach, your staff members learn, grow, and work hard, too. As you seek to get the best out of their performance, you also have to work very hard.
As a coach, you develop and possess various skills and efforts that are aimed at guiding employees to achieve high productivity and positive results. The more you manage as a coach, the easier you’ll find coaching as a manager because you’ll be putting those skills into practice.
In the business world, the terms “coaching” and “mentoring” are often used synonymously. But that’s not always the case. When you hear employees talk about wanting a manager who is a mentor, they’re essentially talking about wanting a manager who carries on as a coach. They want a manager who cares about their development and who challenges them to grow and perform to their best — in brief, what managing as a coach means.
Coaching is the sum of all the coaching skills — giving performance feedback, delegating, motivating employee performance, and so on.
Mentoring is one set in the overall skills of coaching. It’s a significant part of coaching and the set that focuses on guiding employees to do for themselves. Mentoring promotes self-development and self-sufficiency.
Dycom enables high performance for our clients’ business operations through outsourcing management. Our experience and global capabilities make us a world leader in application outsourcing, infrastructure outsourcing, business process outsourcing and bundled outsourcing.
Outsourcing services touch every industry and business process. We transform our clients’ business operations, making them smarter, faster and cheaper, while working with visionary organizations to define innovations in strategic outsourcing.