Here is Five Things to Pass a Tax Audit

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5 Things to Pass a Tax Audit
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What is TAX Audit? Tax audit is a very stressful
time for the small business owners, thereby
adding fear to the big list of entrepreneurial
challenges. Tax audit is formal examination the
IRS conducts to verify information or to uncover
any frauds as well as inaccurate tax returns. The
IRS selects the tax returns to examine
intentionally or randomly.
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Fight the Urge to Panic When you receive the
audit notice, you might feel as if the IRS is out
to catch you. However, the in-depth audits are
rare. The common audits nowadays are
correspondence audits that makes up for 0.7 of
all audits for the fiscal year. Field audits take
place at your business or accountants office. It
involves hours of review. But if your documents
are clean, you have nothing to worry. However,
the IRS has faced years of personal reductions
and budget cuts.
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Gather Necessary Documents If you get selected
by the IRS, they send you a written request for
the specific documents they wish to see. It might
include cancelled checks, receipts, bills and
other legal documents. You must take sometime to
gather these documents and reports. Now, the best
defence is a good offense so you must keep
detailed, organized records that would keep you
in a good position and help the auditor get what
he needs.
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Look for Additional Deductions
If you have accidentally forgotten to include
revenues on the return claimed deductions for it
were not eligible, the IRS would assess the
additional tax due as well as interest from the
date you have paid the tax as well as the
penalties. However, before the auditor closes
this file, ensure you dont miss the deductions
that might offset the increase in the taxable
income. Most of the tax payers overlook
deductions, home office expenses, charitable
contributions, etc. You must take time to review
it.
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Substantiate Your Deductions You might not be an
expert in maintaining the records during the year
of audit. Even if you are missing out on the
records and receipts, the deductions dont need
to be forgotten. In many cases, the IRS allows
for third-party documentations, oral testimony as
well as other type of verifications to
substantiate your expenses. If you are missing
receipts of other expenses, you can get another
copy from the vendor.
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Seek Professional Help If you dont feel too
confident managing documents and receipts
yourself or your spending, hiring a CPA would
actually be of a lot of help. The professionals
would be able to streamline your expenses,
thereby maintaining a proper record of it. Hiring
an attorney does cost money, but it would relive
you from handling all requests for
documentations. Also, the professionals are
experts in dealing with tax and audit laws. In
case of field audit, the auditor would set up an
initial meeting where they would ask you or your
representative questions.
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Thank You
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