What You Should Do to Survive an IRS Audit

Survive an IRS Audit

Small businesses can be audited by the IRS at any time of the institutions choosing. This makes it necessary to be prepared so that you can survive an IRS audit. The IRS can investigate your business activities and sales to determine the veracity of what you have declared in your income tax return. Any discrepancy can result in hefty fines and penalties. After an investigation the IRS can claim that you owe a big tax amount and you need to be preared with response.

If your business is unlucky enough to run the gauntlet of an IRS audit, then there are certain steps that you can take to emerge from the process unscathed.

Here is how you can survive an IRS audit:

Steps That Can Be Taken to Survive an IRS Audit

Make Preparations

During the audit, the IRS will make specific queries and request information about your business to verify how well your business activities tally with what you have reported on your tax return. You must be ready beforehand so that you are not caught off guard and are able to purvey an appropriate answer.

Since IRS audits can be conducted randomly at any time without warning, you must make prior preparations. You can come out on top if you take the right steps.

Prior to meeting the auditor, you must fully peruse your tax returns. You should take a close look at the figures and be prepared to answer how you arrived at such numbers. You should find and collect all records and documents that you used to report your financial activities. The IRS will scrutinize the documents to check how accurately you reported your business activities on your tax returns. These documents can be appointment books, bank statements, checks, and receipts. If you have recorded your business activities well and maintained your documents, you will have better chances of surviving the IRS audit.

Be Aware of What the IRS Wants to Find Out

Remember that the IRS is not just verifying your tax returns, they are scrutinizing your business, lifestyle and spending habits. The IRS will take a close look at your expenditures and your way of living. They will examine your property, vehicles, jewelry, and assets. If they don’t concur with what you stated on your tax returns, the IRS will then probe deeper into your finances. If your business engages primarily in cash transactions, then the IRS will scrutinize your business activities even more closely because cash transactions make it easier for business owners to hide their revenues.

A few business owners also report personal expenses such as vacations, personal phone calls, entertainment and meals as business expenses. The auditors will closely look at what you describe as business expenses. You should prepare your daily activity log and receipts as documentation of your business expenses.

You should hire a tax professional to oversee the audit if you were not able to report revenue over $10,000.

KLB Business Funding is a friend of small businesses. Since KLB Business Funding is always looking out for the best interests of small businesses, it offers them the finest financial services at the most advantageous terms and conditions.

Contact us today to find out more about our services.

KLB Business Funding

3702 Pratt Avenue Bronx NY 10466

(347) 755-2257

info@klbbusinessfunding.com