Posts Tagged ‘IRS audit’
How to Handle an IRS Audit
Friday, November 2nd, 2007
Well, tax season has just passed, and you have just received the dreaded letter; your business is going to be audited this year, the random victim of a government inspection.
An audit can be incredibly stressful, but you can get through it. Here are some tips to help you out.
Be Prepared
The best way to handle an IRS audit is to prepare beforehand. That means doing everything right in your business from the get go; hang on to your receipts, your statements, and everything else that the IRS will check when it’s audit time. In other words, handle your business as though you expect to be audited eventually. Then if you eventually are, you will have a lot less stress and a lot less to worry about.
Of course, even if you know that you have little to worry about, it’s likely that you will still worry. Audits are very stressful; when it’s time to start the process, take a deep breath and try to stay calm and organized - you will get through it.
As far as actual preparation for the audit when it materializes, gather all of your information together, and make an appointment with your tax professional. This is NOT the time to go it alone. Even though you may think that you can handle the audit alone, you’ve got to protect yourself; so seek the advice of a tax attorney or accountant - someone who knows what auditors look for and how they think, and who will protect your best interests.
Being organized is extremely important, and your accountant can help you with this. It will make the agent’s job a lot easier if they don’t have to constantly hound you for important documents, and a complete package will fill in any important holes.
Don’t just surrender a mess either; if your material is organized not only will the agent think well of you, it will send the message that you are prepared for the audit, and are thus unlikely to have transgressed much with your taxes.
Take a Deep Breath and Don’t Panic
It can be very hard, but try not to think of the auditor as the enemy. Contrary to popular opinion, government jobs do not pay particularly well, and the budget- conscious IRS is certainly a case in point. Odds are that you make more than the agent does. Factor in the hostility that these employees face on a day to day basis, and you can probably see why some of them are so hard to deal with on a personal level. They are doing their jobs, and it really is nothing personal. You don’t have to invite them over for tea, but you don’t have to approach them in a spirit of enmity either.
Remember that if you disagree with the resulting audit report, you are allowed to appeal it - it is not automatically accepted. You only have a limited amount of time to do so, so make sure your accountant gets on it right away.
An audit is probably right up there on the list of the most stressful situations for any business owner, but remember that it does not necessarily mean you have done anything wrong. Lifelong business preparation is the key to handling an audit successfully, and it is of utmost importance to take the process in stride.
Stress and anger will not help you to get through the process - it will only make it worse!
Tags: Accounting, advice, audit, Finance and Accounting, IRS audit, Leeia Ladipoh, small business taxes, taxes, tips
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