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One thing that can have very big impacts on a small business when it is audited by the Internal Revenue Service is how prepared it is going into the audit.
There are a variety of things it can be important for a small business owner to prepare for when they discover their company is going to be audited. One are the legal issues and IRS interactions that will be connected to the audit. Skilled tax lawyers can help small business owners with coming up with a strategy in advance for dealing with these issues and interactions.
Another set of audit preparations that can be critical for a small business are documentation-related preparations. There are a wide range of documents that IRS officials may focus on in an audit or that a small business may find helpful in supporting its given position in an audit, including:
- Accounting records.
- Business credit card statements.
- Bank statements.
- Calendars.
- Equipment records.
- Invoices.
- Journals.
- Logs.
- Leasing records.
- Receipts.
- Voided checks.
- Any documents the business used in its tax return calculations.
How organized these types of records are and how easy they are to access can matter considerably for a small business when facing an audit. It can impact how smoothly the audit goes and how much time it ends up taking. It could also impact the IRS’s overall impression of the company, which could influence its behavior during the audit.
So, good record-keeping practices when it comes to documents that could matter greatly in the event of an audit can be important for a business, both when preparing for an audit and during the course of its normal operations.
Source: Business2Community, “Preparing for an Audit,” Mike Kappel, Oct. 19, 2016