In today’s economy, working gig jobs as an independent contractor or even being the sole proprietor of your own small business is becoming increasingly popular. It can be rewarding to work on your own terms.
As a business owner or independent contractor, you have legal duties, including paying taxes. Sometimes, an independent contractor or small business owner will be singled out through no fault of their own for an Internal Revenue Service (IRS) audit.
What is an IRS audit?
In an IRS audit, the IRS will review your tax returns to ensure they are accurate. You can be selected for an audit randomly or through your business interactions with a third party. The IRS will review your tax returns and will either determine they are accurate or identify possible mistakes that need additional action.
Your first contact by the IRS will be through the mail. The IRS will then instruct you on how to proceed. You may need to provide the IRS with additional information. For example, the IRS may want documentation of your income, or a list of the business expenses you incurred over the tax year at issue.
You should keep all income and tax records for a minimum of 3 years, on the off chance that you should be audited. You also may need to attend an interview with the IRS.
IRS audits can be stressful
Going through an IRS audit is understandably stressful, especially when your livelihood is at stake. Some people facing an IRS audit choose to seek legal advice first, so they do not make any mistakes during the audit process.