In Texas, getting audited by the IRS often seems like a nightmare, but if you’re a business owner, it’s something that you should prepare yourself for. The good news is that there are steps you can take to make the process as smooth as possible.
What is an IRS audit?
An IRS audit is a review of a taxpayer’s tax return by the Internal Revenue Service. The purpose of an audit is to ensure that the information on the tax return is accurate and that the taxpayer has paid the correct amount of tax. The IRS may choose to undertake this process randomly, or if there’re red flags, such as inconsistent numbers or discrepancies between tax forms and records.
The IRS can either conduct a field audit, which involves sending an agent out to the taxpayer’s home or place of business or a correspondence audit, which is conducted via mail.
How should you prepare for an audit?
The best way to prepare for an audit is to ensure that you’re organized and keeping good records. Make sure you have copies of all tax returns and supporting documents, such as receipts and invoices. You should also make note of any questions or concerns that you have about your return so that you can address them with the auditor.
Secondly, you should be familiar with the tax laws that apply to your business. The more knowledgeable you are, the easier it will be to answer the auditor’s questions.
Finally, you should consider getting one or more professionals, such as accountants, to help you through the process.
What if it turns out that you owe tax?
If the audit reveals that you have underreported your income, or failed to pay taxes on certain items, then the IRS may send a bill detailing how much tax and interest you owe. You should make sure to fully understand what tax is being assessed so that there are no surprises. If you are unable to pay the full amount, you may be able to work out a payment plan with the IRS.
An audit can be a daunting process. However, it’s important to remember that the auditor is not out to get you, and the process can be relatively painless if you’re prepared.