Audits can happen to any business. Small businesses are no exception. The IRS can conduct an audit on your business when your tax filing contains questionable deductions, your business is of particular interest to the IRS or by random selection. Contrary to popular belief, being audited doesn’t necessarily mean you did anything wrong. And for those who are prepared, it doesn’t have to be the end of the world.
If your small business is being audited, don’t panic. If you stay calm and seek expert help, you can get through your audit easily.
The key to surviving your audit is all in your response. Audits vary in their complexity. The IRS conducts three types of small business audits, each of which call for a different course of action. Here’s what you need to know:
Office audits are typically conducted on small businesses (usually sole proprietors, and a great reason to incorporate your business properly) with revenues under $500,000. The IRS will mail you a notice of the audit, and you will meet with an IRS agent to answer clarifying questions or provide additional documentation. It is highly recommended that you bring a CPA, a tax attorney or an enrolled agent with you when answering any questions.
Field audits are a little more thorough. An IRS agent will call you and arrange a time to come to your business office. Again, you should always have an approved representative with you when meeting with IRS agents, especially if they are going to be at your place of business. Your representative will serve as your advocate and help ensure the agent’s inquiries are limited only to relevant matters.
Taxpayer Compliance Measurement Program (TCMP) audits are much more rigorous and involve a line-by-line review of your return. Be prepared to provide supporting documentation for every entry. This is incredibly time-consuming, but an accountant can arrange an extension, help you stay organized and advocate on your behalf.
Regardless of the type of audit your small business faces, you can prevail if you remain calm, immediately seek guidance and comply with all the IRS’s requests. Ask for an extension as soon as you get your notification to allow extra response time, and take your time gathering all the documentation you need. Most importantly, do not go it alone.
When facing action by the IRS, it is easy to panic. But finding a trusted professional who can guide you through audits and other administrative headaches is invaluable in times of need.
That’s why we recommend you have a lawyer by your side to help you face the many stresses of owning a business with ease. We are experienced in helping small business owners expeditiously deal with audits so you can direct your time and energy toward business growth and potential.
If you want to refocus your priorities, begin by sitting down with us as your lawyer to discuss how you can implement solid legal, insurance, financial and tax systems that will streamline your business operations and minimize your risk of being audited.
This article is a service of Kundani& Chang LLP. We are an award-winning law firm that specializes in business and estate planning for clients like you. The goal for every family is to stay educated on all topics like this, avoid probate, avoid estate taxes, and build a legacy for you and your loved ones. What sets our firm apart is that we build lasting, lifelong relationships with our clients. They rely on us to keep them updated, provide sound legal counsel, and be there for them immediately if any problems should ever arise. The best part is we don’t charge hourly fees to our families, so you never have to worry about speaking to us. If you’re ready to keep your family out of Court, contact us today to schedule an initial consultation or visit our website at www.bridgelawllp.com