How to Prepare for an IRS Audit
An IRS audit is a review of a taxpayer’s financial records to ensure that they are compliant with tax laws. For many business owners, the thought of an IRS audit can be daunting. However, it’s important to remember that with careful preparation and organization, you can and will survive an IRS audit. If this seems daunting or you simply do not have the time to adequately prepare, please consider contacting a CPA to assist with this process. CPA’s such as Peter B. Scala are trained to handle these types of audits and can help relieve much of the stress that comes with them.
In this blog, however, we’ll explore some steps that businesses can take to prepare for an IRS audit.
Step 1: Understand the Audit Process
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he first step in preparing for an IRS audit is to understand the audit process. An IRS audit is a review of a taxpayer’s financial records to ensure that they are compliant with tax laws. The IRS will notify you if your business has been selected for an audit, and they will provide you with instructions on what records they need to review.
It’s important to understand that an audit can take several months to complete and can be a stressful and time-consuming process. It’s crucial to stay organized, keep accurate records, and respond promptly to any requests from the IRS.
If you receive notice that you will be audited, we encourage you to leverage a local CPA, such as Peter B. Scala, to either help you through the process, or explain the process to you in detail up front, to allow you to better prepare for it.
Step 2: Gather All Relevant Documents
Once you receive notice of an audit, and have educated yourself on the audit process, the next step is to gather all relevant documents. This includes, at minimum, bank statements, invoices, receipts, and any other records that support your tax returns. It’s essential to ensure that all records are complete and accurate.
It’s also important to gather any records that support deductions or credits claimed on your tax returns. This includes records for charitable donations, business expenses, and any other deductions that you have claimed.
If you already have a trusted CPA, likely they will have most of this information for you already, from filing taxes, so be sure to reach out to them, first.
Step 3: Review Your Records
Before submitting your records to the IRS, it’s essential to review them carefully. Ensure that all records are complete and accurate and that they support the information on your tax returns.
It’s also important to review your tax returns to ensure that they are complete and accurate. If you find any errors, you should file an amended return before submitting your records to the IRS.
Step 4: Seek Professional Assistance
If you’re not confident in your ability to prepare for an IRS audit, it’s essential to seek professional assistance. A CPA, such as Peter B. Scala can help you prepare for the audit, ensure that your records are complete and accurate, and represent you during the audit process.
A CPA can also provide valuable advice on how to reduce your tax liability and ensure that you are taking advantage of all available tax credits and deductions.
Step 5: Respond Promptly to IRS Requests
During the audit process, the IRS may request additional information or documents. It’s essential to respond promptly to these requests and to provide the requested information accurately and completely.
It’s also important to maintain open communication with the IRS during the audit process. This includes responding promptly to phone calls and emails and keeping the IRS informed of any changes in your situation.
Step 6: Be Professional and Cooperative
During an IRS audit, it’s important to be professional and cooperative. The auditor is simply doing their job, and it’s essential to treat them with respect and provide them with the information they need.
It’s also important to be honest and forthcoming with the auditor. If you’re not sure about something, it’s better to admit it than to provide inaccurate information.
Preparing for an IRS audit can be a stressful and time-consuming process, but with careful preparation, you can survive it. By understanding the audit process, gathering all relevant documents, reviewing your records, seeking professional assistance, responding promptly to IRS requests, and being professional and cooperative during the audit, you can prepare for an IRS audit and ensure that your business stays on track.
Contact Peter B. Scala, CPA today to discuss how we can help you prepare for an IRS audit and manage your accounting needs.