Starting a new business always has ups and downs. As your business gets through the first year or two, you will experience the complex process of maintaining your company’s financial and tax records.
While you may know that you could eventually experience an audit, it is typically not something you look forward to. It can be frustrating and overwhelming to receive the news that the IRS will conduct an audit of your business.
Here’s what you should know as you get ready for your company’s first audit.
What happens during an audit?
When you see a business go through an audit on TV, you may see an intimidating figure come in and threaten the business owner. Typically, there will not be someone looking through stacks of documents in your conference room.
While the IRS will conduct an in-person audit, many audits are completed through the mail, email or other document transmissions. Often, the auditor will start with your tax return and request supporting documents as needed.
Preparing for your audit
You should be aware that scammers may attempt to steal your information by stating through texts or phone calls that they are conducting an audit of your business.
Organization is key to reducing stress during an audit. If the IRS plans to audit your business, you will receive a letter in the mail. Once you know an audit is coming, you should gather documents regarding the issues raised in the IRS letter such as:
- Invoices
- Receipts
- Canceled checks
- Legal documents
When you take the time to assemble the documents that correspond to the tax year of the audit, you can be ready when your auditor makes requests.
An audit does not have to be a stressful event. You may want to talk to a skilled professional to help you prepare for your audit so it can go quickly and smoothly.