What an Audit Could Mean for Your Business

Business Audit

Business owners don’t really like the word “audit.” An audit can cause stress and worry, even when you’ve done everything correctly and by the book. Many people misunderstand audits as an accusation or suspicion of something you’ve done wrong as a business owner when it comes to your taxes. The truth is, audits by the IRS are happening more frequently than ever and they do not automatically indicate that something is wrong.

Common Questions Regarding Audits

Does an audit mean I have done something wrong?

No. It means that the IRS is checking to make sure that you are following tax filing procedures correctly.

What do auditors look for during an audit?

During an IRS audit, your tax records and filings will be reviewed and compared with your earnings and profits for the time period in question. In many cases, the IRS will review these records for the previous 1 to 3 years (sometimes longer if warranted).

Why was my return selected for audit?

As you file tax returns each year, they compare them to a set of statistics for similar returns. These statistics constitute the normal or average return filing. When your filing was compared to the normal filing for similar businesses, it may have raised red flags that alerted the auditors at the IRS. These red flags are looked at by an experienced auditor who then makes a determination if further investigation or review is necessary.

Should I hire an attorney if I am being audited?

The IRS doesn’t require that you have an attorney or a tax professional present during an audit, but it is usually a good idea to have an experienced accountant on hand. Having someone with experience with taxes and audits can reduce stress and help you get through the process easier.

How long will the audit take?

It really depends on how complex the issues are and how many different factors the IRS are looking into. The more organized your financial records are can make a huge difference. In many cases, the audit will take a full day. Additional meetings may be necessary, but they will tell you in advance.

What if I’m not ready?

Again, this largely depends on the specifics of the case. In some instances, you can simply request more time to prepare documents and records. If the IRS finds discrepancies based on your inability to provide documentation in time, they may assess additional tax penalties to you. There are appeal processes for this.

Related: 5 Accounting Mistakes That Put Your Business at Risk

Have More Questions About A Business Audit?

You don’t have to go into an IRS audit alone. Call Hacker Accounting and let us work with you through audit to ensure it goes smoothly and quickly. We’ve helped many small business owners with audits in the past and are qualified to do the same for you. 602-375-5251