From the Nolo Business & Human Resources Center
Preparing for a Business Audit
A tax audit will be much less worrisome if you prepare your business for it. Whos afraid of the IRS? Almost everyone. The key to surviving a tax audit -- and even coming out on top -- is not to panic, but to prepare. What to Do Before Your Audit If you go it alone, before meeting the auditor, you should thoroughly review the tax returns being audited. Be ready to explain how you, or your tax return preparer, came up with the figures. If you cant, then contact your tax preparer or another tax pro. Find all records that substantiate your tax return. As discussed, the IRS has a right to look at any records used to prepare your tax return. Organize your records for the auditor in a logical fashion. Your pre-audit organization of receipts, checks, and other items will refresh your recollection for the audit meeting. Neatness counts. Forget about dumping a pile of receipts before an auditor and telling him or her to go at it. Messy records mean more digging -- and more digging, to the IRS, means more gold for them. Conversely, auditors frequently reward good recordkeepers by giving these folks the benefit of the doubt if any problems arise. Neatness builds your credibility with the auditor. Tidiness and order appeal to an accountants mentality, and most auditors are accountants. Pinpoint problems backing up income sources or expense deductions. Youll need to legally show your right to take tax deductions or other tax benefits claimed on your return. Research tax law, if necessary.
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