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Are You Prepared for an IRS Audit?

(posted: August 8th, 2017)

IRS Tax audit
With tax time firmly behind us, business owners may find themselves wondering how likely they are to be audited by the IRS for this last tax filing, or any others.

Here's what you need to know about the IRS' audit process.

Red Flags that Make the IRS Take Notice

It's actually pretty common for business tax audits to happen randomly, but there are some things that can raise awareness with the IRS and lead to an audit. A few examples of things that will make the IRS take a closer look include:

  • Inconsistencies between previous years and your most current filing (they would have to be significant).
  • Gross profit or expenses that are noticeably different from businesses that are similar to yours and/or in the same industry.
  • Miscalculated or unusually high deductions.

What Happens After You Receive an Audit Notice

Generally speaking, the IRS will notify you by letter. However, if you do not respond, they will follow up by phone.

Many audits are "mail" audits, which only require that you mail in documentation to support deductions you've taken. "Office" audits ask you to take your documents to a local IRS office. There is a version of the audit that requires meeting with one or more IRS auditors at your place of business, and that's the "field" audit.

On the plus side, you will be given time to prepare, no matter which type of audit you are facing.

Preparing for your audit is all about paperwork. Collect and organize your records of income and expenditures, and if you are missing any, reconstruct the information as accurately as possible.

One of the best things you can do to prepare is to keep accurate, detailed records of your income and expenditures.

And in the event that you do face a tax audit, PSVS is here to help. We can clarify what it is that the IRS has taken issue with, identify which documents you'll need, and offer guidance on responding to their inquiries.

Please don't hesitate to Contact Us with your audit questions and concerns.


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