Business owners must balance their passion for their market with business logistics. Owners must manage their budgets and, at times, navigate human resources issues. In some cases, the owner may even need to navigate a discussion with the Internal Revenue Service (IRS). This conversation would occur if the agency decides to conduct an audit on your business.
Why would the IRS conduct an audit? The IRS will conduct an audit of a small business if it believes it has found errors in the business’ tax returns.
How will I know if the IRS is auditing my business? In most cases, the business is notified via a mailing of an impending audit. The audit will generally either take place through additional mailings or in person, with an agent.
The latter type of audit can take on one of two forms. An agent will either conduct a field audit or an office audit. The office audit generally results in a summons for the business owner to come to an IRS office with specific paperwork to review the business’ filings and check for errors. The field audit involves an agent coming to your place of business. This is generally the most comprehensive type of audit for a small business.
What can I do to prepare for an audit? Business owners can act to prepare for an upcoming audit. Tips that can ease the process include:
- Get organized. Go through your paperwork and make sure you have all the documents you need. Check for previous tax filings and supporting paperwork. The agency has specifically targeted business travel, entertainment and meal expenses.
- Get help. Business owners are allowed to have legal representation during the audit. Your attorney can help to ensure all paperwork is in order and advocate for your interests during the audit.