The Internal Revenue Service may audit a business of any size to ensure the company has paid the correct amount of taxes. Receiving an audit notice can cause stress if you do not understand what to expect. Sometimes, it reflects an issue with your return, but other audits are random.
Explore the audit process and prepare your business to address the IRS requirements.
In your audit notice, the agency will indicate whether you will have an in-person or mail-based review of your tax records. Most IRS audits take place by mail, but others take place at your office, an accountant’s office, an attorney’s office or an IRS office.
Refer to your audit notice for a checklist of documents you will need to send or bring for your audit. This typically includes items that support your expenses, income and itemized business deductions.
The audit notice will include a deadline for your submission. If you need an extension, you can request a one-time 30-day delay unless you currently have past-due tax debt.
Make sure to save all your business tax records for at least three years. Generally, the IRS does not audit older returns.
After reviewing your documents, the IRS will make a determination in your audit. Some audits do not result in a change in your tax liability. With other audits, the agency will propose changes to your tax liability. You have the right to agree or disagree with these changes. If you disagree, you have the right to appeal the IRS audit decision.
If you have legitimate tax debt that surfaces after an audit, you can make payment arrangements with the IRS. If you appeal, the agency will refer you to Appeals Mediation. You and your attorney can present evidence about your tax issues in hope of a resolution. However, you have no obligation to accept the mediators’ decision and may continue to the formal appeals process.