Audit Requirements for Small Business
There are several audit requirements for small business. If you are an owner of a venture, it is a big must that you know what these requirements actually are.
This is the best way for you to avoid any complications in the long run and to be able to secure that your business will easily help you in achieving the goals that you have set for yourself.
Do you fear the IRS? Well, this is not a big surprise, considering that almost all of us are definitely afraid of the IRS in one way or another. But how will you be able to survive the tax audit? Aside from preparing the tax audit requirements for small business, the best thing that you should do is to prepare, not panic.
The Stage of Preparation
Before you actually meet your auditor, make sure that you thoroughly review your tax returns that will be audited. Prepare for explaining how you as well as your preparer of tax return were able to come up with those figures. In case that you will not be able to explain it, then better contact the preparer or another tax professional. Look for records that will authenticate the tax return that you have prepared. Make sure that everything is logically organized, including the checks, receipts as well as other items that will help you in recollecting during the auditing.
Importance of Neatness
Never risk dumping all your receipts before the eyes of an auditor and instruct him to do what he needs to do. When records are messy, it only means that more and more and more digging will be needed and for IRS, it is equal to more gold. On the contrary, auditors usually reward those record keepers who are good enough by giving them the benefit of a doubt in case that there will be problems that will arise. Neatness is what will help you establish your credibility with auditors. Order and tidiness is very appealing to the mentality of an accountant and many of these auditors are actually accountants.
Identify the Problems
Make sure that you will pinpoint dilemmas to back up either the expense deductions or income sources. You are expected to be able to show all your right in taking tax deductions as well as other tax gains claimed on your own return. If necessary, it will be better if you will research about tax law.
Things Required for Auditing of Small Business
The success of auditing will mean that your expenses will be documented. Proof must be in good writing although auditors are also allowed to accept even those oral explanations. Minimally, the things that IRS requires for you to present include:
- Bank statements, receipts and canceled checks
- Electronic records
- Records and books
- Appointment diaries, books and logs
- Records for equipment
- Auto records
- Entertainment and travel records
- Expenses for property buying or renting