Christopher Hanley: Entrepreneurs are normally a fearless group. They are independent thinkers who rely on ingenuity and hard work to face formidable challenges as they develop their enterprises. But there are three words that can send waves of worry over many small business owners, internal revenue service.
Running your own enterprise can be taxing enough without facing an IRS on it. So we asked the Internal Revenue Services, Director of Examination for the small business division for some advice on how to prepare for an audit.
Monika Templeman: Probably the most important advice I could give you would be not to ignore the audit notice. If you do so the IRS will generally go ahead with disallowing the expenses and the next thing you know, you have a bill on the mail.
Christopher Hanley: Small business owners especially self-proprietors are at special risk of being audited because the IRS believes self-employment incomes are grossly under reported. The business owner does not have to be the person who handles the IRS question, your accountant, attorney or enrolled agent can represent your company.
Monika Templeman: The initial contact letter that you receive from IRS will usually explain what issues are being examined and what documentation you’ll need to bring with you for the audit.
Have your records organized and ready to present during your appointment. IRS examiners are trained to be professional and helpful. Answer the questions they have to the best of your ability but remain calm. If you don’t understand anything or a certain question, be sure you ask them to clarify that.
About 75% of audits of individual taxpayers or 1040 examinations are closed with the taxpayer and the IRS written agreement. But if you disagree with the exam results, you have the right to appeal. If you are keeping good records and following the law, an IRS audit should not be something to fear. If the auditor does find an error, it could be in your favor and you could be getting some money back.
To learn more about the audit examination process at the IRS, request publication 3498, the examination process. The document can be found online at www.irs.gov.
I’m Christopher Hanley for SBTV.com. Small Business is our only business.
Transcription by:
Scribe4you Transcription Services