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Tax audit tips for small businesses facing an audit

Take a deep breath and relax. Everyone is nervous about an IRS exam. Tell yourself that you will get through it. Determine early on whether you want to involve an expert (CPA, EA, Tax Attorney). Reasons to hire an expert to represent you:

  • If there is any mention of criminal charges, you should immediately hire a competent tax attorney.
  • If you feel that you talk “too much” you should let a competent CPA or EA represent you at the exam.
  • If you are too busy to prepare, you should hire an expert (CPA or EA) to assist you – do not ignore the time deadlines.
  • If you need assistance analyzing the impact of proposed adjustments hire an expert (CPA or EA).

The taxpayer has a huge advantage in that the taxpayer is able to determine how to present the information requested to the auditor. This allows the taxpayer to present the information in a format that is most favorable to the taxpayer.

Other tax audit tips to help you prepare

  • Do not be afraid to ask for additional time if required.
  • Do not bring in any “shoeboxes” of information for the agent. All information should be organized in a three ring binder by request number.
  • You should have an original exact copy of the information given to the IRS Agent.
  • If the IRS Agent is being unreasonable, do not be afraid to ask for and contact his/her supervisor.
  • Treat the IRS agent respectably and allow them to do their job. It is not necessary for this person to be an adversary.
  • Always ask for I.D. from the agent. This will alert you if the agent is with the Criminal Investigation Division.
  • You have several administrative and judicial appeal opportunities. You must evaluate the cost to appeal and if it is worth the cost to fight.
  • Do not forget to file amended state tax returns to reflect any IRS Exam changes.
  • Be sure to reflect any IRS changes into subsequent federal income tax returns.

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