Would you be able to handle an audit?

The mere thought of being audited can be overwhelming to small business owners. Not only are audits costly, but the stress and time demand from them can devastate a company.

But, getting an audit notice doesn’t need to feel this way. In fact, there are plenty of things owners can do to prepare their books and themselves once they know it’s happening.

Below are our top tips for handling an audit as a small business owner.

1. Read the Notice Carefully

Many panic at the sight of mail from the IRS. But anxiety usually causes people to overreact and not read the notice carefully or understand exactly what is being looked into.

The IRS states in its notices the exact year and items that will be reviewed, so before alarm sets in, review the scope of their investigation which could be much smaller than you initially thought.

In this moment, it is also a good idea to remind yourself that just because you were selected for an audit, does not mean you are in trouble or that you did anything wrong. Sometimes returns are selected at random, or certain deductions and credits that were claimed could have sparked an inquiry.

Regardless, keep calm when reviewing any mail sent from the IRS so you are fully aware of what they are asking and do not spiral into fear.

2. Determine the Type of Audit

There are different types of audits that the IRS does, with each having unique requirements and investigative methods. These are: a correspondence audit, an office audit, or a field audit.

Most are aware of correspondence audits which are conducted solely by mail and are typically focused on a single, specific issue. Office audits can be more demanding as they require business owners to bring physical records directly into the IRS. A field audit is when an IRS agent is selected to visit a business in person.

Knowing the type of audit you were selected for helps owners focus on preparing the exact type of documents they’ll need instead of wasting time on unnecessary things.

3. Respond Professionally

Ignoring or delaying a response to the IRS could make a situation worse. The IRS typically sets deadlines for paperwork submissions and responses in their letters. If these deadlines are missed, it often results in fines or even a flag on your account, both of which could lead to a more in-depth investigation.

When speaking or responding to an agent, it is important to be honest, courteous, and professional. Avoid any type of aggressive behavior and only give them facts and answers to the questions asked, without giving up unnecessary information that could complicate your situation more.

4. Gather Documents

Every audit, regardless of the type, requires proof. Although tedious, owners should begin to gather and organize all of their business records to back up their claimed amounts. Things like receipts, invoices, payroll records, contracts, and mileage logs should all be organized and readily available to prevent panic if you are asked to submit them.

5. Get Professional Help

No one has to face the IRS alone. An audit is an incredibly stressful process, and navigating its demands can be incredibly risky if you are not prepared or unfamiliar with it. That’s why a CPA or tax professional should be contacted right away for support. Tax professionals have the necessary training and experience to handle situations exactly like yours and can review, gather, and provide guidance on how to best proceed. They will also be able to represent you before the IRS so you don’t have to worry about misspeaking or mishandling their requests.

If you’re an owner that’s been selected for an audit, our team at A.P. Accounting & Tax Services would be happy to help. We’ve navigated countless businesses through audits while working relentlessly to keep our clients calm, organized, and confident that they can get through this.

Give us a call at 407-328-5001 and we’d be happy to review your situation and discuss.

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