More on Tax Audits

September 13th, 2021 at 6:38 AM

As a business owner, you are in partnership with the IRS, like it or not.

You share your net profits with the IRS according to your partnership agreement (known to you as the Internal Revenue Code).

To make sure you are sharing fairly, the IRS can audit your tax return. That is NOT a pleasant thought.

But your real audit worry is not about the potential bills for unpaid taxes, interest, and penalties. No, your real worry is the additional time the audit will take.

Tax audits can go on for months or even years. Time and resources spent preparing for and participating in an IRS audit are time and resources that are not available for you to run your business.

So, you should consider two things here:

1. 1. How can you spend less time in an IRS audit?
2. 2. How can you pay the IRS nothing extra, or at least as little as possible, in an audit?

You need to get ready for the audit every day because you are in business. The majority of the records you need for the audit are essentially the bookkeeping files, bank statements, paid invoices, and sales documents.

Also, and just as important are the records to prove certain tax deductions for your vehicles, entertainment, and travel.

Planning point. Keep good records every day.

Mark S. Fineberg, CPA