How to get your small business through a tax audit
Even the thought of a tax audit is enough to strike fear in the hearts of Las Vegas residents. While being audited is definitely scary and can bring a wide range of emotions, everyone gets through them. Knowing how a tax audit works and what areas an auditor will pay close attention to can help small-business owners get through them easier than if they were unprepared.
Receiving an official letter from the IRS can be overwhelming, but it is no reason to panic. Official correspondence from the IRS may just be notifying you of a math error in your return or even that they received a 1099 from a possible employee that you may have not included on a return. These types of letters allow you to take care of the error, pay any required taxes or fees and solve everything via the mail. You also have the opportunity to rebut and await a response from them.
Sometimes, however, the IRS will request a field audit. Although an audit can be intrusive, those who keep accurate books and abide by the laws have little to worry about. Immediately contact whoever prepared your taxes and ensure that you have them with you while meeting the auditor. If there are any discrepancies in record keeping, the auditor is within the law to audit all returns that fall under the statute of limitations, so it may be wise to have at least three years of back tax returns available for examination.
Some of the items scrutinized the most by auditors are revenues, employee compensation, professional fees, travel, meals and entertainment, office expenses and other miscellaneous expenses. Keeping accurate books and ensuring that you are organized is one of the most important things to do before an audit. Also, to prevent additional work, avoid giving away too much information. While a Las Vegas tax audit is scary, they can be handled with little chaos if small-business owners practice good bookkeeping and follow all tax laws.
Source: Lawn & Landscape, “Surviving a tax audit,” Daniel S. Gordon, April 25, 2012