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Monday, December 31, 2012

Everything you need to know about surviving a tax audit

Tax audit tips
Tax audits require knowledge and documentation

By Zach Pierson

If you are a small business, audits are going to be part and parcel of the way that you move forward. An audit does not mean that anything is wrong, or that you have to pay more money. Typically, it just means that the IRS wants to touch base with you and to learn more about what is going on. If you are going into your first audit, there are a few things that you can do to make things easier on yourself.

Be neat

If you are called in for an audit, you may be feeling a little pressured or tense. You may even be angry because you think they are questioning your honesty. No matter how you feel, you should not bring all of your records to the event and drop them in a big pile in front of the auditor. This will not make the process go more quickly, and it might make the auditor think that you are trying to hide something in the mess. If you keep things neat, you’ll find that in many cases, the auditor is willing to give you the benefit of the doubt on questionable items.

Audits and bookkeeping

Knowing about books 

The auditor may ask to see your books. Remember that as a small business owner, you do not necessarily need to have them. If you are a small business, there is a good chance that you only keep your checkbook records and your cash register tapes. There is nothing illegal about this, but if you do have books, the auditor has a right to see them. If you do not have them, be up front about saying so. Have a print-out prepared if you keep records on your computer.


Entertainment receipts

No matter how large or small the business, a certain amount of entertaining is likely. Perhaps you end up taking people out, or perhaps the business held a holiday party. Entertainment is one area where auditors can spot mistakes, so it is worth your while to keep track of these receipts as a priority. Keep the receipts, and include any notes on them that might be useful. Remember that the key is to prove that you were not abusing the system.

Providing a work space

The auditor will be coming to your office to do his or her work. This means that they need a space to work, and they will be there for at least a few hours. Setting aside a workspace for them and providing some good light can make their job much easier. Some people offer the auditors their own work areas if there is no other space.


Auditors face a great deal of distrust and anger, but you can make a good impression if you treat them as professionals who are just there to do their job. They are not out to get you, and they want to come to a satisfactory solution as much as you do. Treat them with respect, ask what questions you want, and do not be accusatory.
Business tax due may rise after an audit
Audit results may mean more tax

Understanding the results

After the findings, the auditor will discuss the consequences with you. In some cases, this means that he or she will tell you do need to pay more in taxes; in other cases, they will say that there will be no further payments necessary. This will happen before they leave, so be ready to talk this over.

About the author: Zach Pierson is a tax blogger with the State Tax Help advisors.

* All images US-PDGov


  1. Thanks for the information, I've been stressing out of taxes that I apparently owe, but had no idea that I owed them. I've been scrambling trying to get my finances in order since they put an IRS Wage Levy on my accounts. I heard there was something I could file in order to stop this, so I've been researching methods online.

  2. In order to make sure that the planning is correct and that taxpayers to audit are correctly included in the plan, it is necessary to also have proposals from the head of the assessment and collection section as well as from the head of enforcement and debt management, so that this cooperation will serve to clarify certain issues, such as, data keeping methodology, especially in cases when taxpayer's data are incomplete.