An IRS Audit is a process used by the IRS to verify the accuracy of a tax return by confirming specific items reported on the return. The receipt of an IRS Notice announcing an audit does not mean that a business has done something dishonest or even that they have made an error on their return. It is simply a procedure used by the IRS to determine whether the business has properly reported income and taken the correct deductions. Although some businesses are more likely to be audited than others, a return can be selected for audit in a variety of ways, including random sampling.
Important things to know about IRS Audits:
- It is the legal responsibility of any business selected for audit to substantiate the income and deductions identified by the audit within the specified time period.
- Although many audits result in no additional tax assessments, a poorly conducted audit can result in a large additional adjustment. Combined with penalties and interest, this can amount to as much as 100% of the original assessment.
- Additional taxes and interest assessed by the IRS in the audit process are usually matched by the State.
- A business can submit an appeal to the IRS Appeals Division within 30 days of receiving the auditor’s report if it does not agree with the results of the audit.
Because of the complexity of the tax code, it may be a worthwhile investment to enlist the assistance of a professional who specializes in audit representation before submitting a response or meeting with an IRS agent. The licensed CPAs and Enrolled Agents at BusinessTaxpreparation.com are well equipped to provide this service. They have extensive experience with the audit process and have successfully represented many clients in IRS Audits that have actually resulted in either in a refund or an acceptance of a return without change.