Consider this: Nearly 40 percent of small businesses incur IRS penalties of about $845 per year because of payroll tax errors. And that’s just one area of your business subject to tax law. While many small business owners dream of being a part of the “one percent,” not the 1.5 percent of business owners subjected to an IRS audit each year. Here are a few ways to help keep you out of tax trouble and out of the IRS’ crosshairs:

1. Poor record keeping – Be sure that you keep receipts for all expenses, particularly meals and entertainment over $75. That way, if the IRS asks you for documentation of your deducted business expenses, you’ll be able to produce it. IRS rules require that you keep receipts for three years after the tax return they apply to has been filed. By keeping the receipts you need, you’ll be in good shape if the IRS demands an audit.

2. Not keeping a tax diary – A detailed and accurate tax organizer can go a long way toward helping you answer questions revenue officials may have about your claimed expenses, such as travel and entertainment. A good tax organizer should run about $100, and in light of the hassles and large costs you could pay as the result of an audit, it’s a great investment.

3. Tapping into employee tax withholdings in hard times – Diverting money from the tax withholdings you’re supposed to make from employee paychecks can be a big temptation for business owners in dire straits. Many business owners have done this, treating the money as a temporary loan to their businesses. The risk is not worth the reward, however, as the business owner is held personally liable for this money and could incur substantial penalties if caught by the IRS.

4. Missing common deductions – Remember that many expenses that you incur can be tax deductible. If you work from home, a portion of your mortgage or rent and utility bills may be deducted from your taxes. If you’re on the road frequently, dry cleaning and entertainment costs for business associates can also be tax deductible. Frequently review your expenses and tax rules as the regulations concerning what’s deductible can change fairly often.

5. Failing to oversee bookkeepers and accountants – While you may not be a financial expert, you should take the time to give a cursory look at your books and tax returns to ensure no big mistakes or questionable items are entered. Also, be sure to not use the same person as your bookkeeper and accountant, as having two sets of eyes on your finances reduces chances of fraud and error.

6. Miscalculating automobile expense deductions – This deduction causes a bit of confusion because business owners can use either a mileage formula to come up with their deduction or they can tally up the actual expense of using the automobile. The mileage deduction is easier to calculate, but if your car depreciates in value significantly or has incurred significant costs, the more difficult to calculate actual expense may be a more advantageous method.

7.  Putting equipment and supplies together  – Equipment should not be lumped with supplies as the rules governing deductions are different for equipment and supplies. Most small businesses are allowed to deduct up to $24,000 in capital expenses, which includes equipment. When deducting equipment, you must determine the depreciated value of the equipment before claiming your deduction. Supplies, such as paper, printer ink, etc. can be deducted without this calculation.

8. Incorrectly classifying employees as independent contractors – Employees work for you directly, independent contractors work for themselves or a company contracting with yours. It’s very tempting to classify workers as independent contractors, as you won’t have to pay employment taxes on them or deal with the burden of withholding payroll taxes. However, if you classify workers as independent contractors, and the IRS decides that they would be more properly classified as employees.

9. Late payments – Don’t forget that your taxes are due on a quarterly basis. Businesses that wait until April 15 to pay their taxes could face substantial penalties for late payment. By following “pay as you go” rules, you can avoid penalties and make the April 15th tax filing deadline a little less dreadful.

10. Failing to report large cash transactions – The IRS requires that cash transactions of $10,000 or greater be reported on Form 8300. This includes cash transactions spread out over a period of time for the same item or service that add up to more than $10,000. This rule is intended to hinder money-laundering efforts by drug and organized crime operations and terrorists.

Even if you’re a math whiz and great at spotting deductions, you still may want to get your business’ tax returns scrutinized by a tax professional, as they likely will have superior knowledge about tax rules and what’s deductible.

By making sure that you follow all tax rules and regulations, you can help stave off audits and tax headaches from government officials and also avoid the large penalties that may be assessed against your business as a result of non-compliance with tax laws.