Sacramento Accountant for IRS Audits of a Business
Our Sacramento accountants for IRS audits of a business can help businesses prepare for a tax audit by the Internal Revenue Service. Call today.
Audits happen to less than one percent of the population every year. The chances of being audited are slim, but if the Internal Revenue Service (IRS) requests that your business undergo one, you should be prepared. Use the help of the Sacramento tax audit accountants at Cook CPA Group to support and advise your business throughout the auditing process. If your business gets an audit letter in the mail from the IRS, you should contact an accountant from Sacramento audit accountants from Cook CPA Group as soon as possible.
How an IRS Audit WorksAn audit by the IRS is a total review of all of your accounts. The IRS requests certain financial documents from you and then reviews them to make sure that you are not reporting less income than you actually earned, that you are not over-reporting deductibles, and that you have paid all the taxes that you owe. After an audit, the IRS may determine that everything is fine, or they may find that your business still owes money. In rare cases, your business may actually be issued a refund. If your business owes money to the IRS, your business will receive a bill immediately after the audit. There are a few different methods by which individuals and businesses are selected to undergo an audit. One way that a person of business is selected to undergo an audit is by random selection through the IRS’s system. Another way that an individual or business is selected to undergo an audit is if they are connected to another person or business that its being audited. Individuals and businesses may also be selected to undergo an audit if the IRS detects something abnormal on their returns. The abnormalities they detect may be big deductions or charitable donations, misclassification of employees, or owning a cash business such as a bar, restaurant, or convenience store, among other things. The more income an individual earns or the more revenue a business produces, the more likely they are to undergo an audit. A majority of audits are correspondence audits, which means that you will only have to mail certain documents to the IRS. Other audits take place either in your business’s office or in the IRS’s offices. No matter the type of audit, an accountant is always useful when it comes to making sure that you are providing the right information to the IRS.
How to Avoid an IRS Business AuditSome audits are simple and require producing only a few pieces of information that the IRS is missing. Other audits can be complicated and consume a great deal of time and money. To avoid headaches and difficulties, you should do whatever you can to avoid being audited by the IRS. You can lower your business’s chances of being audited by being meticulous when you file your taxes in the first place. Hiring an accountant to do your taxes for you is one way to ensure that your taxes are filed without mistakes. And if you do choose to do your taxes on your own, you should check your math, make sure that all the information is entered correctly and is consistent between documents, and take care to leave no spaces blank. Also, this should go without saying, but you can lower your business’s chances of being audited by being completely honest on all of your tax returns. Fabricating or omitting information to get or keep extra money is not worth it in the end. Keeping all of your documents organized and in a safe space is another way to reduce your business’s chances of being audited by the IRS. Maintain well-kept files containing receipts and bills, employment documents, W-2s, canceled checks, loan agreements, expense logs, and anything else that is pertinent to your taxes and financial recordkeeping.
How to Prepare for an IRS Business AuditThe first thing you should after your business receives notice of an audit is to respond. You have 30 days to do so; if you do not, the IRS may automatically adjust your tax liability, which means that you will have to pay additional taxes. Responding gives you the chance to prove that your taxes are justified. You are also able to request an extension. After receiving notice of an audit from the IRS, you should get in touch with an accountant as soon as possible. An accountant can help you understand exactly what type of information the IRS is requesting, locate the necessary forms, and prepare for the remainder of the auditing process. Then, you should get your records in order. Go through your files and make copies of any information that the IRS has requested. Seek out missing records. Another important part of being audited is understanding your business’s rights during the process. An accountant can help you with this, but you have a responsibility to seek knowledge of your rights on your own, too. Taxpayers’ rights during the auditing process are:
- The right to be informed
- The right to quality service
- The right to pay no more than the correct amount of tax
- The right to challenge the IRS’s position and be heard
- The right to appeal an IRS decision in an independent forum
- The right to finality
- The right to privacy
- The right to confidentiality
- The right to retain representation
- The right to a fair and just tax system