Most business owners would rather suffer through a root canal than be subject to a tax audit. Even for those who keep meticulous records and adhere to all state and federal regulations, the auditing process can involve weeks of anxiety and tedious red tape. Without professional guidance, most taxpayers don’t have the information or the confidence to defend them against an audit.
Although there’s no surefire way to bullet-proof yourself against a tax audit, a good CPA can help make the process less painful by offering helpful tips like these:
- Keep records for at least the past three years. The IRS typically initiates audits within 18 months of a filing, but by law they have up to three years before the statute of limitations ends. By having all of your forms and receipts organized and easily accessible, you’ll greatly reduce stress in the event of an audit. When you work with a CPA, you’ll receive all of the year’s tax documents neatly packaged for your files.
- Avoid math mistakes. Although a numbers blunder doesn’t necessarily mean you’ll be audited, honest mistakes can result in increased attention from the IRS, which is rarely a good thing. A CPA will check all calculations meticulously before submitting your return.
- Acknowledge red flags before the IRS does. If you have an unusually large deduction or another anomaly, include copies of all related documentation to head off any confusion or suspicion. The IRS agent examining your return will recognize your efforts to remain compliant.
- Be cooperative. Remember, an auditor is just doing his or her job. If you react belligerently, you could be opening yourself up to closer scrutiny. Clearly and politely answer the questions that are asked of you, but don’t volunteer additional information. When you treat the auditor with respect, you’ll most likely find the experience to be less unpleasant than you anticipated. One of the bonuses of working with a CPA is that he or she will negotiate directly with the IRS on your behalf.
Facing a tax audit can be scary, but you don’t have to do it alone. Above all, the most effective tool you can have is a qualified CPA. A certified tax professional can guide you through the process, address your questions and concerns, and prevent common pitfalls, all of which will help you get through the ordeal with the least possible amount of pain and hassle.