A business tax audit is an examination of relevant records and documents related to the business. An audit is primarily done by the IRS to ensure that business transactions are correctly reported or identify cases of fraud and errors.
What is the purpose of a business audit?
An IRS agent may conduct a business audit to ensure the accuracy of your records and tax return. The taxpayer must demonstrate that all expenses recorded on their books are also listed on the tax return. An IRS agent may be sent to conduct a business tax audit for many reasons, like a business that is consistently claiming losses.
How can I prepare for an IRS agent’s visit?
The IRS will contact you when they have completed their review of your records and tax return. The IRS may not need to visit your premises if the audit can be conducted entirely over the phone or by mail. If an in-person meeting is scheduled, it should be conducted within 30 days after completing the audit process.
You may be nervous about a tax audit or an IRS agent visiting your premises to discuss your business finances as a business owner. However, there are steps you can take to prepare for the visit. One of the best ways to get ready is by creating a file containing all relevant information and documents. This preparation will make it easier to answer questions posed by the IRS agent if records are organized and readily available.
Is there anything else I need to know about being audited by the IRS as a business owner?
When the IRS audits your business, they will likely need to review your personal and business records to check for errors that may have been made. The documents requested by the IRS during a business tax are dependent upon the purpose of the audit.
The agency often initiates the process if they believe that your business income warrants a closer look. Once the audit is complete, and if the agent finds any tax offenses like underreporting, the IRS may resort to punitive measures like seizing assets or imposing tax liens to recover the lost taxes. For this reason, it is critical that your documents are clear and easy to reference to ensure that your business is accurately depicted.