Understanding—and surviving—an IRS audit

While receiving a personal greeting from the IRS in the mailbox is never a welcome sight, initiating a few preemptive steps to be prepared for an IRS audit can transform the process from less of a crisis to more of a minor inconvenience.

First, business owners can reduce the stress of an audit by understanding exactly what the process will require. When the IRS has selected a company for review, the agency will contact the business either by mail or by telephone (it should be noted that the IRS will NOT make contact via email due to disclosure requirements, so owners should be wary of any electronic correspondence claimed to be made on behalf of the agency). The agency will also specify whether the process will be conducted via mail or in person. Those requested to be completed by mail may require business owners to submit additional supporting documents to verify a filed return. In-person requests will be handled at either a local IRS office or the location of business.

Once the type of audit and/or location are specified, business owners should begin locating and organizing any requested supporting documents. It is in this instance that business owners can take several precautionary steps to make sure this process can be conducted as smoothly as possible by making concise and frequent record keeping and documentation a habit.

For example, business owners may have several pieces of property, such as computers and vehicles, that are used for both business and personal pursuits. Keeping logs of business uses in or near such pieces of property provides strong supporting documentation should the IRS ever pursue an audit, according to nolo.com. In addition, keeping receipts and statements as well as written details for out-of-town business meetings and conventions can also help ensure claimed deductions are allowed in full.

By taking a few moments to file records and make quick notes during many of the everyday transactions of a business, owners can help greatly alleviate the stress that an impending audit may bring. Dumping a box of disorganized and crumpled receipts onto the table can not only prolong the process but also encourage auditors to dig more deeply for additional mistakes. “Neatness builds your credibility with the auditor,” as Frederick W. Daily explained on nolo.com. “Tidiness and order appeal to an accountant’s mentality, and most auditors are accountants.”

For professional guidance on how to sucessfully navigate an upcoming IRS audit, contact a certified public accountant at Klein Hall CPAs.