So, you just found out your business is getting audited. Don't panic! You can get through it. The first thing to check is whether it's a real audit. The IRS emphasizes that it always initiates audits by mail. If you get a phone call or an email, it's a fraud. Even if you've confirmed it's a legitimate audit, it doesn't mean you've done anything wrong. Sometimes you'll get a "related examination," when your returns involve issues with other taxpayers whose returns were selected for an audit. Other times it may be completely random; you're selected based solely on a statistical formula.
How it works The IRS will handle your audit through the mail or with an in-person interview to review your records. The interview may be at an IRS office (office audit) or at your home, place of business or accountant's office (field audit). Remember, you will be contacted initially by mail. The IRS will provide all contact information and instructions in the letter you receive. The IRS may request certain specific documents. For a business, these may include such employment documents as uniform policies or dress codes, continued education requirements, W-2 reimbursement statements and Schedule K-1. The IRS accepts some electronic records that are produced by tax software, which it may request in lieu of or in addition to other types of records. The auditor will let you know what is acceptable. Note that the law requires you to keep all records you used to prepare your tax return for at least three years from the date the tax return was filed. Generally, the IRS says it will include returns filed within the past three years in an audit. However, if it identifies a substantial error, it may add additional years, but rarely more than six. What are your rights? That is what the government may do. Here is what you have the right to expect:
How will the audit end? An audit will end in one of three ways:
Your best bet is to work closely with a qualified tax professional from the moment you get the notice to the ultimate resolution. This is the best way to ensure the audit goes as quickly and as painlessly as possible. Comments are closed.
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