When owning a business, it is important to keep your business’s finances separate from your personal finances as this can cause big problems if you are ever audited by the IRS. One of our clients unfortunately didn’t follow that rule. Our client owned an insurance office and would take money out of his personal bank account to pay for marketing and advertising expenses and then reimburse himself through his business account. Unfortunately, he did not keep the proper records for these expenses and when the IRS audited him, he had no way to prove these expenses occurred. Our client also switched accountants and the new accountant made errors on their tax return that triggered the audit. When this client came to us, the IRS was saying he owed hundreds of thousands of dollars in taxes and needed to pay. Luckily, our firm was able to fix the errors made by the previous accountant and comb through the company’s financials to try and provide substantiation for the expenses the IRS was trying to disallow. After negotiating with the IRS, we were able to get a new assessment that substantially lowered the amount of taxes our client owed. In the end, we saved him over $142,000 and settled his tax problem once and for all!
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