Every business owner has a fear in the back of their mind about getting that dreaded certified letter from the IRS or Internal Revenue Service. While it could be related to any tax question or concern, it could also contain an audit request. This means that an IRS agent is specifically honing in on your past or present year corporate tax return. The process can be tedious and you could possibly be fined a significant amount should you have made a mistake on a past return or fail to turn over all of your financial statements. Getting your ducks in a row starts with hiring a professional accountant. Here are some steps to take prior to submitting your information to the IRS.
1. Read And Follow The Directions Carefully
It's important to open up a letter from the IRS immediately. There will likely be a letter stating why they are contacting you, what information they need and how to submit the information to them. If the letter is in regards to a specific tax year, you only have to report on finances pertaining to that year. Most audits focus on lack of information regarding an itemized expense or information that does not match their financial records. Locate receipts and as much data as possible regarding the time frame and transaction they are inquiring about.
2. Gather All Receipts And Financial Statements
In addition to any receipts or transaction numbers you have, you should also have a financial statement pertaining to the month it took place. A monthly income statement should provide the following information:
- All sales and total business revenue
- Expenses, including interest and cost of goods or services sold
- Pre-tax and net income for the requested time frame
Your financial statement should be backed up by transactions or written receipts coordinating to specific sales or business related expenses. This information must match all information on the receipts and records or you'll have to explain why it doesn't.
3. Seek The Services Of A Certified Accountant
Set up an appointment with a certified accountant. Be sure to bring the following:
- All corporate or business tax returns for the past two-years as well as the dates the audit is requesting
- Financial income statement stating gross income received pertaining to the audit time frame
- Interest earned for the fiscal year of the audit time frame and those one year prior
- Year-end worksheet with trial balance, balance sheet, income statement and any adjustments
- All payroll entries, including W-2 forms
- Any capital assets
Your accountant may need more information, including receipts and bank statements to verify information. He will then advise you what to do to properly comply to the IRS.
4. Correct And Amend Any Mistakes
When going through your financial statements pertaining to the audit time frame, you may notice mistakes or some items that were not documented properly. You can personally amend these mistakes, but you can't change or delete them. You must notate, date and initial why you feel these errors are valid. Never conceal them—or you could be held liable in tax court or a court of law.
Getting a notice of audit from the IRS can be unsettling. Contacting an accounting professional will help ensure that your calculations are in order and ready to submit to the IRS. Contact a business, such as Mamaroneck CPA, for more information.