Is there anything a small business owner dreads more than finding themselves subject to a tax audit? If there is, we can’t think of it. As it is with most things, an ounce of knowledge is worth its weight in gold. Getting audited doesn’t have to be the end of the world – as long as you know how to withstand the process. Read these tips to survive this annoyance with savvy and sanity:
1. Know what you need
Your auditor will want to see as many records and receipts as possible. To keep the meeting as headache free as it can be, have all of these documents prepared ahead of time.
2. Ask for more time
If you’re having trouble finding or organizing all the information you need before your scheduled meeting with your auditor, always know that you can usually ask to postpone the meeting. The IRS must complete audits within 3 years of when the original tax return was filed, so there is time. If you need it, speak up and ask for it.
3. Keep quiet when necessary
Speaking of speaking up…try not to do it too much. As a small business owner, your assertiveness and pro-activity are some of your greatest strengths. But when it comes to an audit, don’t offer up information that isn’t specifically requested. Try to stay quiet and to-the-point as much as possible. Definitely don’t try to offer up tax information from other years aside from the specific year being audited. Behavior like this might seem to reasonably stand to work in your favor, but clean, simple, and direct is the goal here.
4. Don’t be afraid to appeal
If the conversation with your auditor isn’t exactly going in your favor, try to limit the amount you argue with them, especially during the initial interview process. Once the examination report is issued, you should absolutely feel free to contact your auditor if there are points you are confused about, or don’t agree with. And in the worst case, if you are truly discontent with the results of your audit, the IRS has an appeal process, or you can go to tax court.
5. Do your homework
The legal aspects of the tax auditing process, along with info about standard procedures and what your rights are, are available in the form of tax guides and IRS literature. Seek this stuff out. Knowing your rights is undeniably the most important part of tax audit preparedness.