Eat Blog Talk 632: How to Survive an IRS Audit and Which Red Flags to Look Out For with Ansley Beutler
In episode 632, Ansley Beutler teaches us how to navigate the complexities of IRS audits as small business owners and how to recognise key red flags that might trigger an audit.
Ansley launched her blog, The Fit Peach, in 2018, sharing simple, family-friendly recipes that prove healthy eating can be both delicious and approachable. Her passion for flavor-packed, wholesome meals quickly resonated with a growing community of home cooks and wellness-minded individuals. Building on her experience as a CPA and her firsthand knowledge of running a successful blog, Ansley founded Peach Perfect Financials—a boutique accounting firm dedicated to empowering creative entrepreneurs. Specializing in bloggers and content creators, her firm offers tailored financial services, including bookkeeping, tax planning, and retirement strategies. With a unique blend of professional expertise and industry insight, Ansley helps entrepreneurs navigate the financial challenges of self-employment, enabling them to focus on what they love: growing their business.
In this episode, you'll learn the importance of accurate bookkeeping and clear documentation, how to deal with the audit process itself, and strategies for effectively managing the emotional and logistical challenges that can arise.
Key points discussed include:
- Understand your NAICS code: The NAICS code is crucial in determining industry-specific expense and profit margin expectations from the IRS. Make sure you have the right code (711510 for bloggers/influencers) to avoid red flags.
- Maintain a reasonable profit margin: The IRS looks for profit margins that are in line with industry standards. Consistently low or negative profit margins can raise questions.
- Pay yourself a reasonable salary: If you have an S-corp, be sure to pay yourself a salary that is proportionate to your business's profitability to avoid potential issues.
- Keep detailed bookkeeping records: Organized and well-documented financial records can make the audit process much smoother and demonstrate your commitment to compliance.
- Cooperate and communicate proactively: If audited, be responsive to the IRS's requests and communicate openly about your business practices. This can go a long way in resolving any concerns.
- Understand the emotional impact: Audits can be stressful and emotionally draining, so be prepared to manage your emotions and seek support if needed.
Avoid lumping expenses into broad categories: Provide clear breakdowns and explanations for specific expense categories, as the IRS may scrutinize these closely.
- Leverage your CPA's industry knowledge: Having a CPA who understands your business model and industry can help ensure proper expense reporting and minimize audit risks.
- Focus on your "why": During challenging times, such as an audit, remember the reasons why you started your business and let that drive you forward.
Connect with Ansley Beutler