What To Do When You're Being Audited

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As a business owner, there are few things more important than being able to gain control over your finances. Not only should you ensure that you keep your books up-to-date and thorough, but you should be proactive when it comes to managing your taxes and paying what you owe. However, even businesses that do everything right can occasionally be the target of an audit by the IRS. It might be a scary situation and you may feel ready to panic, but take a deep breath, collect yourself, and follow the tips below to ensure you’re getting the correct advice from real professionals.

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Don’t Do Anything Stupid

If you’re worried that the records you have do not reflect your finances appropriately, then you may want to gather the evidence to show you the truth of your money situation. However, some business owners, in a panic and worried that they have done something wrong (even unintentionally) may think to try and start erasing their records to get rid of the discrepancy. However, doing that can make the situation much worse, turning what might have been a simple accounting error to be repaid into a case of tax fraud, which could see the punishment being a lot more severe. Take a moment and gather yourself, so that you don’t do anything that could jeopardize you or your business.

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Know What Kind of Audit You’re Looking At

Hearing the words “IRS audit” might be enough to get the alarm bells ringing for some, but in reality, it might not be as threatening as you may imagine. Take the time to read the letter and understand what the scope of the audit is. It may be a simple mail audit to ensure accuracy in your records and, if those records are accurate, then sending off the information they want might be the quickest way to deal with it. However, larger-scale operations like office and field audits may require a lot more information, as well as having to answer questions directly. If that happens, then you want to make sure that you follow the next tip.

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Make Sure That You Have Some Help On Your Side

It’s very unlikely that you, reading this, are a tax expert. If you’re not trained to understand tax law and to ensure compliance with it, where possible, then you shouldn’t try to respond to a more complex audit by yourself. Make sure that you have your tax professional involved in responding to the audit. For smaller audits, an accountant might be enough, but for more comprehensive processes, a professional like attorney Steven Klitzner might be necessary. You want to make sure that you’re checking with someone who knows how the IRS works before you make any decisions. Having someone with that know-how by your side can also help to keep you calm, and can help you avoid doing anything too defensive or hostile.

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Get Your Records Ready

Of course, before you respond, and while you’re getting ready with the help of any professional at your disposal, you should take the time to make sure that your records are in order, as well. Whether with the help of a bookkeeper or with accounting software, take the time to make sure that you have all of the records of your finances from the past tax year (or any other tax years that they are explicitly looking at). You want to make sure that you have records of all income and expenses, including invoices, receipts, bank statements, and proof of larger expenses, such as the lease of your business property. Missing data is going to make it more likely that the IRS will take an even harder look at you.

Prepare for Questioning

Depending on the nature of the audit, you might have to answer some questions from an auditor in person. This can be a nerve-wracking experience, but you want to make sure that you avoid trying to strategize too much without the help of a tax lawyer present. In particular, you want to answer the questions for the information that they are looking for, but you shouldn’t offer any information beyond that. Don’t tell them things that they’re not looking for, it can just end up raising more questions, which can result in a longer investigation, even if there is nothing really there to investigate.

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