The Illinois Department of Revenue can perform a tax audit to determine if you have reported your taxes accurately for a given period. This process can be highly stressful, especially without the proper preparations.
As a business owner, you should keep crucial documents the department may require for an audit. Diligent recordkeeping is helpful during tax season and for maintaining accurate financial records.
What are the documents you need for a tax audit?
Receipts are essential for these audits. When recording receipts, include notes on what they were for and how they relate to your business. These records can help you prove mileage and monitor the dollars paid or received for a particular service or product.
Bills, canceled checks and business travel logs are also crucial documents you should save in case of an audit. You should also store vital legal documents, including those you submitted for divorce or custody agreements, property acquisitions and criminal or civil defense papers.
If you took out a loan, you may also have to present the documents associated with the process. A loan agreement should specify the borrower’s name, the amount borrowed and the terms of the transaction. The auditors may also ask for a breakdown of how you used the loaned money.
During a tax audit, the revenue department may also seek loss or theft papers. These documents may include the following:
- Explanation of the loss
- Insurance reports
- Police reports
- Appraisal from a qualified adjustor
- Images or videos to show the extent of damage if there are any
You may also have to present employment documents and reports for each shareholder’s share of income, credits, losses and deductions.
Maintain accurate financial records
Organizing important documents can help you ensure the accuracy of your finances, which can be crucial during tax season. Keep your relevant financial documents in one location with your records, including those that go back three years.
This practice can help you determine how much you should pay in taxes and reduce the stress during audits.
