Nobody wants to get that letter in the mail ― the one marked with those three big letters, “I-R-S,” announcing that your financial history is being reviewed by the federal government. Dealing with the IRS in any extended fashion can be a nerve-racking prospect, especially when you know they’ll be auditing your very livelihood. However, like most things in life, the fear and anticipation of an audit is usually worse than the event itself. A healthy dose of planning and preparation can make your small business audit a smooth process that’s free of unnecessary delays or financial harm to your business’ operations and bottom line.
When preparing for a small business audit, you might find yourself asking yourself some difficult questions — the first of which is likely some variation of “Why me?”
The good news is that if you don’t know the answer to that question immediately after asking it, you likely haven’t done anything wrong (at least not intentionally). If you’re feeling unsure about why you’re being audited, though, it also means that you and your tax attorney probably have some work to do to uncover any errors that might exist on your federal or state tax returns or to prove that the IRS has made a mistake.
As for potential reasons behind an audit, here are just a few of the financial practices that could increase the likelihood of your small business being audited:
If any of these apply to your business, you may want to reconsider these practices. Making some minor changes to your operations could significantly lower your risk of being flagged for an audit through the Internal Revenue Service’s computer system (if you haven’t received notice of one already).
If you choose not to make these changes or if it’s simply not feasible to do so in your case, then be prepared to deal with a potential audit — perhaps even on an annual basis. Of course, while no one enjoys an audit, it’s really nothing to fear if you’ve taken the proper precautions and you have nothing to hide.
We strongly suggest that you seek out the assistance of an experienced tax attorney when preparing for a small business audit. At S.H. Block Tax, our team of tax professionals has years of experience dealing with the IRS and the state of Maryland, and we’re well-equipped to handle any obstacles that might arise in your case.
If you choose to go it alone, however, the following steps can help you mitigate the damage and get back to focusing on day-to-day business operations as soon as possible.
Make a commitment to review your financial accounts on a regular basis and maintain accurate records all year long. Even if you still get audited, at least you will have all of your information up-to-date, which will save you valuable time if the notice arrives in the mail.
The following is a list of documents the IRS will likely want to see, although it’s certainly possible that your assigned agent will want to view items that are not on this list.
Following the steps listed above should create a smoother experience for you in the event of an audit, and they will also help you establish some much-needed credibility with your IRS agent. Still, these tips are just the beginning of what you’ll need to make it through a small-business audit without running into complications, and we highly suggest consulting an experienced tax attorney like Stanly H. Block to assist you if you’re being audited.
More importantly, consulting a good tax attorney can help you avoid an audit in the first place. At S.H. Block Tax Services, we’ll not only help you get through an audit with the least amount of pain and stress possible, but we’ll also show you how to set up your business and accounting properly to avoid future run-ins with the IRS.
If you have recently received a notice in the mail informing you of the IRS’ intention to audit your small business, please contact S.H Block Tax Services by completing this brief form or by calling us at (410) 872-8376. We will deal with the auditor directly (in most cases, our clients never have to meet with the state or the IRS), prepare documents and arguments on your behalf, and negotiate and settle any claims with the IRS.
Even if your audit has already concluded, we can potentially help you through the appeals process, and we can also help you update your accounting and business processes to help protect against another audit in the future.
Being audited by the federal government can be a stressful and frustrating ordeal, but at S.H. Block Tax, we use our decades of tax law experience to make the process as streamlined and pain-free as possible. Please contact us today for a free consultation if you need help!
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