In a perfect world you would never have to face an IRS audit, but the best way to be survive one, is to always be prepared. You never know when, or if, the IRS will send you a letter informing you that your returns have been selected for an audit. The best practice for accounting purposes is to always file an honest tax return.

Audit Tips for Business Owners in Arizona:

 

 

• Be Organized:  Track all expenses, income, mileage, receipts – and file in one place.  The IRS will outline the paperwork needed for your audit in the letter they send to you.  Keep financial documents for at least six years.

• Do not ignore the letter from the IRS. While it may be tempting, the problem will not go away. The IRS typically gives 30 days to get your papers in order and respond to the letter. They can take drastic measures if you do not respond including collections for back taxes.

• Follow Directions: Have all IRS requested documents with you at the audit. Failure to do so could increase your tax liability. Do not bring documents that were not requested by the auditor. This could lead to additional questions.

• Proof of employment is important especially for self-employed individuals. Entrepreneurs may need to prove they have a business rather than a hobby. Being organized and updated records as well as a separate business bank account are good practices.

• Make copies of the IRS requested documentation. Keep the originals for your records.

• Being professional to the IRS auditor is in your best interest. They’re simply doing their job.

 

• Everyone makes mistakes so admit if you are wrong. If faced with hard evidence from the IRS auditor that a mistake was made, it’s best to own up and accept the consequences.

The number of audits is set to increase as the federal government seeks money to cover the national debt. This makes reporting accurate income and expenses even more important. As a small business owner having an accounting professional on your team is money well spent when it comes to peace of mind.

Related articles

• What Are Tax Audits? (turbotax.intuit.com)
• The IRS Random Audits Are Back (turbotax.intuit.com)
• Tips to Finding a Suitable Tax Professional