Have you received a notice from the IRS that your business may be audited? Understandably, the idea of a tax audit strikes fear into many people's hearts. But the more you understand about the process of an audit, the better equipped you can be to meet the challenge successfully. To start, here's what you need to know about the three types of audits and what each means for you.
1. Mail Audit
Certainly, the most common type of audit is actually one where you may never meet the IRS agent. A mail audit is an efficient use of the IRS agent's time when a matter isn't too complex. And it's usually the least stressful type because you never find yourself summoned by an IRS agent in person.
A mail audit is, as it sounds, conducted via correspondence. The agent sends a request for the information, which is submitted and followed up on by further correspondence. Along with having the right documentation as requested, you and your representative must be able to explain any details or answer questions professionally and clearly in written form.
2. Office Audit
The second most common audit variation is one where the taxpayer or their representative is asked to bring documentation to an IRS office. Small businesses are some of the most likely to receive an office audit. The reason is that businesses tend to have more complex tax situations than individual taxpayers, so the audit needs more documents than is feasible to do through the mail.
Unlike a mail audit, you'll need to have all your backup and documents prepared before the big day. The auditor will be looking for specific information, so work with your representation to ensure that you don't volunteer so much — either in conversation or in paperwork — that it creates unnecessary complications.
3. Field Audit
Finally, the field audit is conducted at your place of business and is generally the most complex audit. It's also often the most stressful. The IRS agent is usually an experienced accountant, so you must be as thoroughly prepared as possible.
In advance, you and your representative should go over any relevant business transactions and records with a fine-tooth comb. The more calm and professional you are, the more organized you appear, and the more efficiently you can provide what the auditor needs, the smoother this will go.
When you know what to expect from your audit, you can better prepare. With any of these types of examinations, good representation is your biggest asset. A qualified and experienced representative will guide you through finding what you need and presenting it with confidence. Start today by meeting with an IRS representation service in your state and learning more about your audit options.
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