So the IRS wants to audit you?
Posted by perkmik64 on September 29th, 2011
Every year the IRS sends out thousands of letters requesting audits of business tax returns. If you should get one, how do you react? Your first reaction may be fear, panic and anxiety. That is understandable, but non-productive. So, move on from there and read the notice of audit once again.
What is it that the letter is requesting? Talk to the person who prepared your return. If in doubt, call up the IRS auditor and ask him/her to speak to your tax preparer. Be sure to sign and date a form allowing your preparer to speak with the IRS. Then get organized. Working with the IRS can be analogous to preparing for a sporting event: you must be ready with a good defense and a great offense.
How do audits occur? Every business return is “scored” by the IRS. At random, the IRS selects a batch of returns and checks the score with an “average return”. If a selected return deviates from the average, the return is flagged for an audit. Bear in mind, being flagged for an audit does not mean that the IRS is out to get you. They want to know by what means did you arrive at certain figures which affect your tax liability.
So, how to handle an audit? The first rule is to reduce your risk of “exposure”. Do not open yourself up to further areas of investigation. If possible, meet your auditor at his office. Bring with you all documents necessary to support your business return: checks, receipts, contracts, credit card statements, etc. Remember, the IRS auditor is looking for under-reported income or over-reported expenses. Answer all questions with honesty, but briefly. Give your auditor copies of your documents but only if they are requested.
Ask for a copy of any document in the IRS file which you do not have. Do not become argumentative, belligerant, or rude.
Remember, there is never a perfect return. Every return is subject to interpretation of the tax codes. Your auditor may be a stickler for expense deductions under $100.00; another auditor may focus on expenses over $1000.00. The “picky auditor” can be frustrating and time consuming. Remember, stay calm.
Please be aware of this: no matter who prepares your return, you, as the business owner, are responsible for the contents therein. Approximately 4% of all business tax returns are audited. Handling an audit relies upon organizational skills and the ability to work with difficult personalities. And it takes time.
Green Apple Resources has represented clients during an audit. We have the skills necessary to deal with auditors. If you are having tax problems please contact us. We will assess your liability and give you a recommendation as to how to proceed.
Remember, your success is our business!
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