A notice from the Internal Revenue Service announcing an impending audit will unnerve even the most stalwart business owner. But there’s no need to stress, or stress too much, as long as you prepare. The following tips will help you understand what to expect when you’re expecting a business audit.
Check the mail
According to IRS.gov, an agent will not dial your digits to let you know about an audit on your business; the mailman will drop the notification in your box. And, the IRS won’t use the phone for the audit, either. Instead, you might have to meet the IRS auditor at your office, his office, your home or your tax professional’s place of business for an in-person interview. A mail audit is also possible, which would require you to submit requested documentation. No matter if you’re facing an in-person audit or a mail audit, read the letter from the IRS very carefully. In it will be everything you need to do, send or prepare for the audit.
Don’t assume the worst
Just because the IRS has targeted your business doesn’t mean you’ve done something wrong or there’s a problem, reports IRS.gov. Your business may have been randomly selected. If your investors’ or business partners’ returns have been flagged, that’s a good reason why yours was singled out, too.
If you’re not in the business of tax prep or a current employee of the IRS, it’s likely you don’t have the in-depth knowledge required to fully comprehend the minutia of your impending business audit. This is why you need to seek assistance from a tax professional, an attorney or an enrolled agent, suggests Bankrate writer Kay Bell. Tax law is exceptionally complicated, and a trustworthy financial professional can break down what type of audit your business will experience, what you need to do to prepare, possible outcomes and what you can expect after the audit is concluded.
Go back in time
According to IRS.gov, your audit can cover returns from the previous three years, but it can be expanded to up to six years if the agent discovers a major discrepancy in one of the returns. How complex your audit is or how hard it is to gather the necessary documentation can impact the length of your audit.
If you are unhappy with the results of your IRS audit, you can fight it. According to The Balance writer Jean Murray, you can appeal the decision or go to tax court with your case.
“There is a simple appeal process if the total amount you owe (including fines and penalties) is $25,000 or less, and a formal process for larger amounts owed. The key to getting an appeal heard is to file in a timely manner and to base your appeal on tax law, not based on moral, religious, political, constitutional, conscientious or similar grounds.”
When your business is facing an audit, knowledge is your best weapon. Read the notice carefully, seek the advice of a tax professional and diligently prepare the requested information.