When the IRS contacts you to conduct a business audit, you probably have many questions. An audit will look into all the facets of your business and may even delve into your personal life for further insight. Most audits are resolved without issue, but knowing all the steps in the process can help you go into them with confidence. Here is a comprehensive guide to IRS audits.

Reviewing Your Tax Returns

While business audits can happen randomly, they are often triggered by discrepancies in your tax return. The first step an auditor will take is to compare your return to your business’s financial records, which you should always keep for several years. After this initial review, the IRS can clear your company, issue you penalties for issues, or ask you to provide supplemental documentation for further assessment.

Reviewing Tax Deductions

Most business owners use some form of deduction to lower their tax burden. During an audit, an IRS representative will usually request receipts and other documents that prove all items claimed in your deductions are tax-code compliant.

If your business uses tax deductions, have a certified public accountant (CPA) assist you with bookkeeping and tax return preparation to steer clear of penalties and ensure the deductions you claim adhere to the law.

In-Person Meeting

While most business audits are conducted entirely through the mail, in some cases the auditor may ask you to visit their office or request to visit yours. In case of an in-person meeting, make sure you have all your financial documentation organized and ready for review.

If you’re paying or receiving a visit from an auditor, contact your CPA to prepare you for the meeting and gather any documents you may need.

To eliminate the stress from business audits, clients in Holmen, WI rely on Engelson & Associates, Ltd. These CPAs assist with every step of individual and business tax planning, including filing your return, bookkeeping, answering IRS queries, and QuickBook® advising. Visit their website for a complete list of their services, then call (608) 526-3437 to schedule a consultation.