Have you ever worried that your business would be audited by the IRS? The idea of undergoing a tax audit, especially when your business is the target, doesn’t sound like a fun time.
After all, as a business owner your time is valuable. In fact, most of the time there’s probably not enough of it. Lack of time is one thing that makes a tax audit so stressful.
Another, of course, it the idea that you might owe the government even more money than you’ve already paid. Fortunately, there are some steps you can take to defend your business during an audit.
Maintain Your Composure
As you begin defending your business during an audit you should maintain your composure at all times. Try to stay positive and have a good attitude. Be respectful and polite to the agent as you talk with them.
It’s probably better not to meet with the IRS agent by yourself. You may accidently reveal unneeded information they could use against your business. Alternatively, have your company accountant with you to answer any questions the IRS representative asks.
Contact Your Accountant
One of the first things to do when defending your business during an audit is call your business accountant. They will not only appreciate the heads up, but may need to assist you in the process.
There are likely documents such as receipts, income statements, and expenses that your accountant will need to gather. Your accountant may even need to meet with the IRS agent on your behalf.
Gather Information in Advance
Most likely your business will receive a notice that includes the information the IRS would like to review. This gives you time to sift through business records and documentation to find what is needed.
Once the auditor arrives, having all of the requested forms and paperwork ready will speed up the process. It also give you time to make any needed corrections by pre-auditing your own business taxes.
Ask for Additional Time
Always give them the information they ask for as quickly as possible. Never refuse to cooperate. But you can let them know it will take a little time to comply with their requests.
If an extension is needed in order to meet their deadlines, ask what to do to get one. Such inquiries are not unreasonable considering the complexity of some business information.
Never Volunteer Information
Defending your business during an audit is a touchy situation. As stated above, the auditor assigned can use any information given to them against you.
That is why you should not voluntarily provide information of any kind to them. Instead, provide the documentation they ask for and nothing more.
Remain wary of engaging in too much friendly banter as well. At times all it may take to let down your guard is a friendly IRS agent.
Remember that they are not there to be friends with you. They are attempting to find errors and discrepancies that increase your tax liability. Their job is to make money and that is one way they do it.
Business tax audits are never going to be pleasant experiences. But that doesn’t mean you can’t make it easier when defending your business during an audit. Use these tips to help you make it through a business tax audit quickly and as unscathed as possible.