January 29, 2013 /24-7PressRelease/
-- Preparing for an IRS income tax audit
When a business owner gets a notice of an IRS audit, a bit of fear is sparked even if his or her records are spotless and well organized. An audit may be time consuming and is always a bit stressful -- and it is just one more thing for an already overscheduled business owner to put on the "to do" list. Small business owners, especially those with high incomes, seem to be the most common target for an IRS Audit according to a report from Transaction Records Access Clearinghouse.
What to expect from an audit
When the IRS notifies a business owner of an audit, it tells him or her the areas of the return that are being questioned. The IRS will expect extensive documentation, including all bank statements and deposit slips. The business owner should make sure all books and records are organized and well put together and reflect what is on the tax returns. An in-person audit can last anywhere from two to four hours; additional meetings may be scheduled based on the IRS's findings.
After the audit, the IRS will exercise one of two options. It may send the business owner a balance-due report specifying taxes due along with penalties and interest. Or it may issue a no change letter, clearing the business of any additional burden.
How to avoid an audit
The first thing that people can do to avoid an audit is to report everything tax related no matter how small or unimportant it may seem. The IRS usually cross-checks everything on the business's tax return. Also, make sure not to blur the lines between business and personal expenses for such things as lunches, travel and other expenses that can easily be seen as personal. Be able to prove, with documentation if possible, how these expenses relate to business. In a similar vein, business owners should be scrupulous in taking only legitimate deductions. Itemizing deductions and taking the maximum allowable deductions in all categories can be a red flag to an IRS agent.
It is also important to meet all filing deadlines. Even if business owners cannot afford to pay their full tax liability, they should file on time and pay what they are able to show that they are acting in good faith.
In general, the IRS will be more likely to audit people whose tax returns stand out in some way. For instance, people with very high or very low incomes are more likely to be audited. Also, people who take a lot of deductions or whose deductions do not correlate with their incomes are more likely to be audited.
What to do if you get an audit notice
It is in your best interest to seek legal representation if you receive an audit notice from the IRS. A qualified tax law attorney will examine the areas of your tax return or returns that are being subjected to the audit, review any errors that might have been made, and estimate additional taxes, penalties and interest due. Your attorney may also attend the audit with you.
Article provided by Bruce Gage
Visit us at http://www.brucegagelaw.com/---
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