Internal Revenue Service Audit
Internal Revenue Service Audit is complicated thing to understand. It is important you know more about it. Everyone should be responsible when paying tax.
They should be able to maintain records of tax payment. Of course your business should always be ready for audit. There are penalties involved when you don’t pay your taxes regularly.
Internal Revenue Service or IRS is USA Government organization overlooking and enforcing tax laws and tax payments in United States of America. Many people with lesser income quietly pass out of the screening machines of the IRS, but large earners have to pay a big amount of their income as tax. A taxpayer stays all-happy and delightful unless he does not receive an IRS audit notice for his company. An IRS audit notice is a consequent of the tax return and is done on doubtful and hesitant businesses. Certainly, the IRS audit notice is very fearful for the entrepreneur. The purpose of IRS audit is to reveal any underpaid taxes by the business. In this article we will have a look at the steps that you should take if you are chosen for IRS audit.
Maintain Precise Records
If your tax return has been finally chosen for an IRS audit, you should dig out all the past years transactions and details. Many businesses fail in presenting themselves true in front of IRS audit only because they are not able to get the past records.
Therefore, you should have a good, maintained and scrutinized record of all the sale and purchase transactions of your business. It allows you to quickly defense yourself from the IRS audit. It is suggested to keep at least three years record for tax and other transactions. Also, you should categorize all the sale and purchase transactions. This will help to filter out any specific transaction. Otherwise, you will be rummaging around for the IRS-asked transaction. All the bills associated to your business must be categorized in proper and associated folders.
Get ready for the Audit
You should have a detailed look at the past activities of your business. You should learn the details of your return to refresh your memory. You should prepare settlements for all the possible questions by the examiner. You should be comfortable and open with all the answers.
If you think that IRS audit is wrongly imposing some charges on you, then you may consult some professional CPA (Certified Public Accountant). The CPA will be able to properly guide you through your misunderstandings and confusions. Time will be definitely given to you to consult your private lawyers and CPAs.
A 20% penalty is charged if you have been caught underpaying the tax related to your property or negligence in reporting rules. Otherwise a 75% penalty is charged if you have been caught underpaying via some serious fraud.
Therefore, you should not underpay your taxes in order to stay free and away from IRS Audit.
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