A Short Guide to Deal with IRS Audits

IRS Audits

Last Updated April 14, 2023

In one of the previous blogs, we discussed the instances when a small business has to go through IRS audits. Here, we will extend that discussion and shed some light on the dealing aspect of the IRS audits.

Before we start this discussion, it is important to share some observations of the bookkeeping and tax preparation experts regarding IRS audits.

  • Mail audits are the most common for small businesses
  • In-person audits are rare and only summoned when the regulators find some serious issues with filed taxes.

Types of Audits

Contingent on the level of sensitivity, there are three types of audits. Most audits are not very serious, about 75% of audits are completed through the mail, according to some news reports.

  1. Correspondence (Mail) Audit – Repetitive errors from incorrect calculations or missing documentation are often handled through correspondence.
  2. Office Examination Audit – An office examination is arranged at a local IRS branch where they will usually try to find out if you reported all of your revenue and that your deductions are legitimate.
  3. Field Audit – A field audit is the most general of the three. An IRS agent will pay a visit to your home, business, or accountant’s office to inspect records and files in order to approve that your tax return information is legitimate.

What is the Scope of Different Audits?

Mail audits are usually uncomplicated and entail a handful of elements. If you have enough knowledge regarding taxes and bookkeeping, then you can sort out mail IRS audits on your own. On the other hand, field and office audits are more work-intensive.

In those types of audits, you need to assemble all the bookkeeping details and tax information that the IRS has requested beforehand. If you are not maintaining your finances with the help of accounting and bookkeeping experts, then you are in for big trouble by the hands of IRS.  The IRS audit becomes stricter when the entity in question can’t furnish the required financial documents.

Preparation for an IRS Audits

It’s pretty simple to prepare yourself for an IRIS audit given that you haven’t committed any intentional mistake for any ill purpose. In the case of mail audit, prepare the respondent answering the queries made by the IRS. You can get a tax preparation expert on board to make that response more effective and result oriented.

In case of a field or office audit, you need to have all the requested paperwork in your hand. In some cases, you might need the reconstruction of some documents with the attestation of a third-party. Have an expert bookkeeping person on your team to make those third party-correspondences less exhausting and more meaningful.

Don’t Get Impatient

When the IRS has decided to revise a return, it takes time to generate the final results. So, don’t get anxious and impatient for the results. Also, if you don’t agree with those results, then you have the right to dispute them in the IRS court of appeal within 30 days after receiving the final report.

The chances of getting an IRS audit significantly drops when you work with a bookkeeping and tax preparation firm to take care of the finances of your venture. My Count Solutions provides cost-effective bookkeeping and tax preparation solutions, particularly for small business owners. Get in touch with them if you want to protect your business from IRS audits.