No business owner wants to be audited by the IRS. Audits, however, are a fact of life for some businesses. While the thought of undergoing an IRS audit can be daunting, it’s crucial to remember that preparation is key. A Nashville accounting firm can help business owners in the area to minimize the stress and disruption associated with an audit.
When you receive that dreaded IRS notification, it’s important to understand that being audited doesn’t necessarily mean you’re in trouble. There are several reasons why the IRS might select your return for an audit, including random selection and computer screening. Regardless of the reason your business has been selected for an audit, you’ll want to make sure that you’re fully prepared before the audit date. That said, here are a few tips to help you out:
How to better prepare for an audit
1. Understand the scope of the audit
It’s crucial to understand what specific areas of your tax return the IRS will be examining. The audit notice should detail the items under review. Focus your preparation on these areas and be ready to provide detailed explanations and supporting documentation. If you’re unsure about the scope, don’t hesitate to consult a trusted local CPA.
2. Gather and review relevant documents
Once you know what the audit will be looking at, the first step is to gather all relevant financial documents that the IRS has requested. For reference, here are some of the documents and records the IRS may want to see from you. Ensure these documents are well organized and readily accessible. Carefully review each document to ensure accuracy and completeness before presenting them to the IRS.
3. Prepare for the interview
If the audit includes an in-person interview, preparation is key. Discuss with your CPA or accountant the potential questions the IRS may ask and the responses you may need to provide. Ensure you understand your financial statements and the rationale behind any significant transactions. Being prepared can help you present your case confidently and clearly to the IRS auditor.
4. Stay calm and cooperative
It’s essential to remain calm and cooperative throughout the audit process. Be honest and transparent with the IRS auditor. If you don’t know the answer to a question, it’s better to say so and follow up later with accurate information than to speculate. Cooperation and a respectful attitude can go a long way in making the audit process smoother and more manageable.
5. Understand your options
If you disagree with the results of the audit, know that you have the right to appeal. The IRS has a formal appeals process where you can present your case to an independent body. Your accountant or CPA can guide you through this process, helping you compile the necessary documentation and arguments to support your position. Understanding your options and rights can empower you to challenge any findings you believe are incorrect.
An IRS audit can be a stressful experience for any business owner, but understand that you don’t have to face the IRS alone. Working with a trusted Nashville accounting firm, like Evan Hutcheson, CPA, LLC, can help you navigate the audit process with confidence.
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