No business owner wants to be faced with an IRS audit, and some may never have to, but if you receive a tax audit notice, follow these five tips from Surgent.
- Most IRS audits are correspondence audits, as opposed to those at an IRS office or a field audit. The IRS is typically seeking proof to support a position taken on the return. Don’t ignore the tax audit notice and timely respond to the IRS deadlines with any relevant cancelled checks, etc. This type of audit can usually be handled without the assistance of a tax professional. If you are selected for a field audit at your place of business or asked to come into an IRS office, it is best to have an accountant or lawyer represent you.
- As simple as this sounds, have a copy of the return you filed with the IRS. Remember Section 6107 only requires your tax preparer to keep a copy of your return OR a list of the returns prepared for basically three years. You, therefore, should not rely on the preparer to have a copy of your return if and when you are audited. It is best to make sure you retain a copy when the return is initially filed or you may find yourself trying to get a copy from the IRS.
- Prepare for the audit by identifying complete and accurate records substantiating each item of income and expense.
- Remember that the audit presents a time when a taxpayer can submit substantiation for expenses not previously claimed on the return. If for example, a taxpayer inadvertently omitted a deduction, its inclusion unless time-barred will usually be permitted at audit.
- Again, seriously consider hiring a pro. Hiring an accountant or attorney to represent you is usually a wise choice. Filing Form 2848, Power of Attorney and Declaration of Representative, authorizes the individual chosen to represent you at audit.
Nick Spoltore is Director of Tax & Advisory Content for Surgent Professional Education. Mr. Spoltore is a graduate of the University of Notre Dame and of Delaware Law School. Before joining Surgent Professional Education, Nick practiced tax and business law at the firm of Heaney, Kilcoyne in Pennsylvania and also in Delaware.