There are few things more worrisome for a small business owner than having to endure an IRS audit. However, the process does not have to be as daunting as it seems. By following the advice given here, you can make your way through this otherwise frightening process with less stress, and find that the auditor assigned to your case may make the decision you’re hoping for.
Read the Letter You’ve Received
One of the worst issues with the IRS is that their correspondence is written in an odd language it seems only a CPA would understand. If you’ve received a 1-page letter, then it is usually a courtesy notice that you’ll be contacted further when your case is reviewed. If you receive more than one of these letters, it probably means that your case is in limbo and you should call your auditor.
Call the Tax Examiner on Your Case
In order to reach your tax examiner (the one doing the audit), you’ll need to call the IRS’ general hotline. They are open from 7AM to 7PM. Expect to be on hold for at least a few minutes, and as long as thirty. When someone picks up, have a note put in your file that you’d like the person on your case to call you back. However, before hanging up, ask if the one who answered your call can give you some insight into why you are being audited. This can help you get ready, and it can also speed up the process if you send them what they need.
Get Them the Info They Ask for
Let’s say you are being audited because of your expenses, particularly as they pertain to travel. There are several methods for handling this. First, you can mail in copies of your receipts. Second, you can make a copy of your calendar or day planner, showing the places you had to go and the miles from your office. Print and organize all your receipts and QuickBook checks so that your records are immediately available to the auditor. Oftentimes, small businesses don’t bother keeping an organized and accessible record of their invoices and purchases—if you find yourself in this boat, direct all your energy towards fixing it before the audit.
While being disorganized can be costly, it shouldn’t result in a punishment for legitimate deductions. Do everything you can, use every legitimate resource at your disposal, and try your best to prove the legitimacy of your business expenses.
Call Your Taxpayer Advocate
Lastly, when you feel that your audit is not going fairly, you can call the Taxpayer Advocate in your state. This group of federal employees is a separate unit from the Treasury’s auditing division, and when they receive a call that someone is being mistreated or ignored, that file gets a flag that requires it to be concluded in 48 hours or less!
Dealing with the IRS does not have to be a huge hassle. It is, without a doubt, a nuisance that most entrepreneurs and their businesses would rather not deal with, but they play a necessary role in our government. Mostly, though, what you need to remember is that the auditor who has your case wants to help you reach an honest and fair conclusion. If you feel that is not the case, you should call your Taxpayer Advocate. Most of all, remember that an audit does not—and should never—mean the end of a legitimate business venture. Follow these steps to guide your small business through the auditing process without risking its financial future.