No business owner wants to receive a tax audit notice in the mail. However, the proper preparation and advice can relieve some of the stress that comes from facing IRS scrutiny.
When you learn your business faces an audit, try these four tips to help the process go as smoothly as possible.
Know what to expect
The IRS conducts an audit to make sure your tax returns are correct for specific years. They will review documents and receipts against your tax forms and make adjustments as necessary. In most cases, you will owe more money, though sometimes an audit results in a refund or acceptance of the original returns as correct. The IRS conducts most audits completely by mail. Few taxpayers face an in-person audit. However, the agency may require you to have an audit in an IRS field office or at your place of business.
Your audit notice will indicate the documents and forms you must return as well as the submission deadlines. In addition to these specific items, prepare to answer questions about your income, deductions and other aspects of your tax returns for the audited years. Your CPA or tax attorney can help you gather the requested files. Avoid providing additional or irrelevant information beyond the documents requested in your audit letter.
Taxpayers usually have 30 days to respond to the original audit notice. Avoid missing IRS deadlines, which can result in interest and penalties. Ignoring the IRS is never a smart strategy.
Understand your appeal rights
Keep in mind that if you disagree with the IRS auditor’s decision, you have legal recourse. You can first appeal your case to the IRS Office of Appeals, followed by an independent appeals officer and finally, the U.S. tax court if you still have concerns.
When you get an audit notice in the mail, do not panic. Gather your trusted legal and financial team and get ready to submit requested documents that satisfy the agency’s concerns.