Surviving a Business Tax Audit 101

On: February 10, 2024

Two words that any business owner dreads hearing are “tax audit.” These two words are scary to most individual taxpayers and businesses alike. No one wants to deal with the IRS. Tax audits feel very invasive as the IRS wants to review your financial information and assets. Knowing how to survive a business tax audit can help you rest easy and prepare for what may happen throughout the process. Retaining IRS tax experts to walk you through a business tax audit is the best way to go and can save you a lot of time, energy, and even fines/penalties. What Is a Business Tax Audit? A business tax audit is when the IRS wants to review your business tax returns to make sure they are accurate and that you properly claimed your income and only took the deductions you should have. The IRS can perform an audit in one of three ways:

• By mail
• In person
• At an IRS office

In most cases, a business audit is done at your place of business in person. How In-Depth Does the Audit Go? An IRS business tax audit can be quite complicated and extensive. You can expect the IRS to consider all areas of the business and examine each area closely. IRS agents will look at your files, records, accounting systems, and bank accounts to ensure everything aligns with what was stated on your tax return. How Long Will a Business Audit Take? Business audits are not quick and can take up to a year for most businesses. Of course, they can go quicker if you are well prepared in advance for it. This is why it is recommended that you work with a professional tax team, as they can make sure the process moves quickly and they can verify that you have all the information you need beforehand. What Can Trigger a Business Audit? Some audits are done randomly, but there are some triggers that may cause your return to get flagged for an audit including:

• Claiming deductions for a home office that are unusually high
• Not providing enough detail about income or expenses
• Claiming deductions for meals that are unusually high
• Not reporting all salaries of employees

What Outcome Can I Expect From the Audit? There are three main outcomes that you can expect from the business audit. First, the best outcome would be that the auditor finds that all information is correct and accurate. They do not find any errors and you are not assessed any additional tax liability, fines, or penalties. The second outcome is that the auditor does find that a mistake was made. In this instance, if you agree with the mistake, you may incur some additional penalties, owe tax liability, and have to pay a fine. It is also possible that your mistake meant you paid too much in taxes and the IRS actually owes you money. The final outcome is that the auditor determines a mistake was made and you do not agree with what they found. When this happens, you will need to file an appeal to dispute the findings. This can be a long and difficult process, so it is vital that you work with a tax professional to do this. Leading Tax Group Can Help Represent You During a Business Tax Audit  A business tax audit can seem like a painful process, but with the experts at Leading Tax Group on your side, you can breathe easy. We have many years of experience handling all types of tax issues and can take care of your business audit for you. Representing you is our job and you can avoid dealing with the IRS when you turn to our team. If you are facing a business tax audit, pick up the phone, and give us a call today.