Update July 7, 2015
With the record budget deficits being recorded by the Federal Government, the amount of auditing seems to be increasing. As such the IRS Audit Process Small Business and how business owners deal with the issue become more important as time passes.
It begins when they send out a letter that basically does six things:
- Informs you of the examination
- Informs you of the individual returns and the years under examination
- Gives you a date, time and place for the Audit
- Gives you the contact name and contact information of the auditor
- Provides you with an initial list of documents to gather
- And Informs you of your rights as a taxpayer
After you receive the notice, the next thing for you to do is to get representation. Representing yourself in an IRS Audit, or having a bad representative, is the most dangerous position that you could be in. The IRS in many ways, is just a collection agency. Generally, when agents sit down with individuals that don’t speak taxation, aren’t educated in tax law, and are inexperienced in the audit process, they’re going to collect much more revenue for the government, then they would if they were dealing with a professional.
The next step is to get your records together. The audit letter will provide a beginning list of documents that the auditor would like to review. You will need to get those records together. By records, I mean physical, original documents. By definition, electronic records can be thrown out in an examination. Because they are not original, given the rules of evidence, they could have been altered or tainted. The agent may allow them. But I have seen agents disallow them as evidence. In other words, keep your records properly.
Certainly, your representative should then do a pre-examination of the evidence to se what problem if any will arise in the examination. Before the exam occurs is the best time to deal with any problems. It also is the best time to find additional evidence.
Once the audit begins, it can move in many different directions, depending on where the evidence leads the auditor. Its always best to be prepared in the event of any circumstance. But above all, don’t piss off the auditor. Poking the bear will never lead to a reasonable outcome. Remember to be nice.
If you are having problems with your IRS Audit Process Small Business in Chicago Illinois or have issues with your accounting in general, we would love to help. I love hearing from my readers, and can be contacted at
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Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.