Strategies: Top 9 small-business tax audit triggers

— -- You've finished preparing your small-business taxes, right? No? Don't worry — I've got some last-minute advice to lessen your chances of getting audited as you rush to the wire before April 15.

Frankly, the likelihood of getting audited is pretty darn slim in any case. In fact, small incorporated businesses (Subchapter S) had less than one-half of 1% chance of being audited in 2008, according to the IRS. But having been audited once, I can tell you, you want to avoid the hassle even if you come out squeaky clean (like me).

With some help from the accounting firm BDO Seidman, I've put together my list of the top nine triggers for audits of small businesses. But hold on — you don't want to avoid all of them. In fact, some of them are darn good business practices, even if it means the IRS pulls out their magnifying glasses.

Do's and don'ts

1. Hiding income. Years ago, I learned gas station convenience stores were one of the most audited businesses. Why? Lots of people pay with cash. If you get paid in cash, rather than by check or credit card, it's tempting to just 'forget' to declare some of that income. That's a huge IRS no-no. Don't.

2. Making more than a million dollars. Have an adjusted gross income of more than a million dollars? You'll have the highest chance of getting audited. In 2008, according to the IRS, they audited 5.6% of millionaires' returns, compared with 2.9% of those making more than $200,000, and less than 1% of those making less than $200,000. But, heck, if you can clear a million dollars profit, take the audit. A definite do.

3. Mixing personal and business expenses. It's tempting to write off your new living room furniture or that trip to the Caribbean as a business expense (after all, you read e-mail while sitting on the couch or at the beach, right?) but the IRS certainly frowns upon that. Don't.

4. Entertaining. Another area where personal and business expenses are likely to be construed as intertwined. Also, the IRS doesn't want to see excessively lavish parties (except, it seems, from huge banks getting TARP money, but that's another story). Remember, you can only take 50% of entertaining and food expenses as a deduction. Nevertheless, small businesses need to be out there talking to customers over lunch or dinner, at a ballgame or golfing. Most entrepreneurs don't entertain nearly enough. Do.