An audit of tax is rarely a positive experience for any business. No matter whether the audit is part of a business or total, it can be frustrating if you only need to review certain records or cause major problems in accountants and business advisors for the whole audit.
Your business will be notified about an audit. You will be told which section or parts of your tax returns will be examined in order to help you assemble the documents. You have to make a decision on who will represent you. If you do not have the necessary knowledge, it is recommended that you hire an expert in the field of business tax law. If you’re unable to afford a professional to represent you and have a problem with the audit, you can request a suspension of the audit. This will allow you to consult with a certified public accountant, tax lawyer, or until you are properly accompanied. The professional representation is expensive, but you can rest assured that the audit will be done efficiently and will save you time and stress.
To be able to review the supporting documents for several key areas of the business you have reported on your taxes, it is necessary that all available documents are available. Starting with income, bank statements and deposit records will be reviewed. Sales records and other official accounting records will also be reviewed. It is necessary to document any gifts, valuables, inheritances, or other exchanges for goods or services. If not, these could be considered taxable income by IRS.
The accounting for your business’s indebtedness is going to be closely examined. Checks, bank and credit card statements, receipts, as well as other business records, can all be compared to the tax return. You will pay particular attention to debts, business losses and charitable contributions. For proof that the expenses were valid, accurate records must be kept.
In order to prove that the business loan money was indeed used for business purposes and not just interest, bank statements will be compared.