Getting audited for your tax returns is an experience that many would be happy not to go through. A lot of business owners prefer not to undergo close scrutiny from any Internal Revenue Service agent. Such process can be taxing and strenuous, but this situation can be downplayed.
According to Certified Public Accountants, only 1% of those who pay their taxes undergo an audit. However, 80% only undergo a correspondence audit. This kind of audit is done through mail and focuses on limited issues. Those undergoing office and field audits are the hardest hit. These types of audits are the worst types. In any case, one should always be prepared for the worst.
9 Steps to Prepare For the IRS Auditor
1.Wait For The IRS Letter
Any company, business, or individual who is subject to a tax audit will receive a letter. It will be in a plain brown envelope with a return address of the Internal Revenue Service. Check for the markings “Official Government Business”.
2. Never Throw Away or Misplace The IRS Letter
Upon receipt of the IRS letter, put it in a safe place where it won’t be misplaced or thrown away. The notification letter will have valuable information such as the date on when the audit will take place, preparation instructions, and the required documents.
3. Surround Yourself with Only The Best
You will need an auditing team to collect data and review tax documents to ensure that every tax issue has been addressed.
4. Get Help From The Professionals
A company or business should always be prepared with the worst scenario in mind. In this line of thinking, you will be needing help from a CPA (Certified Public Accountant), Tax Attorneys, and enrolled agents. These individuals are knowledgeable in various areas of tax laws. With this group of professionals, you can sleep more soundly during the audit investigation.
5. Prepare Your Employees
During field audits, the IRS agent will be drilling your employees about the company’s financial records. It is better to have your employees review financial methods and data that they are responsible for. This will at least prepare them for the battery of questions.
6. Be Consistent With Record Keeping
Always make sure that everything is being recorded for tax compliance purposes. Always make sure that you keep files orderly and available. In this way, when a document or record is being asked it can easily be retrieved and explained if needed.
7. Gather Information
In any case, you have not kept track of your tax records, be sure to recreate the records needed for the tax year that is being audited. Make sure that every record is supported with documentation if possible.
8. Prepare Facilities Or Workplace For Possible Inspection
Some IRS agents will require the tour of your facilities to get an idea on your overhead allocations. So make sure it is ready to welcome them!
9. Act Professional At All Times
Always make sure that you comply with the wishes of the IRS agent and never forget that they are here to audit your business.
With the Internal Revenue Service (IRS), being prepared at all times is necessary to ensure your audit goes fluidly.
Need more help preparing for the IRS auditor? Contact ABIP today! One of our accounting and auditing experts will help you with any concern you may have.