What Happens if Your Company is Audited?

The mention of an audit strikes fear in the hearts of small business owners, even if they are proactive to be compliant with the laws and regulations. As a business owner, there is no reason to worry about an audit if you have the right team of bookkeepers and accountants in place to help.

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Do you know what is involved with an audit? Most small business owners don’t know a lot about the auditing process, which means that they fear the unknown. Here is a little information to educate you about potential audits that might occur:

Potential Types of Audits

Being audited doesn’t necessarily mean that someone from the IRS will be knocking on your door. There are several types of audits that can occur, and your accounting team can help with all of these scenarios. Potential audits might include:

  • Mail Audit: If the IRS needs more details about your tax return, then they might send a letter in the mail requesting specific documentation.
  • Correspondence Audit: This type is similar to a mail audit, except the communication could happen through an electronic channel of communication. Typically, a correspondence audit happens when the IRS is collecting unpaid taxes or needs supporting documentation to back up claims made on the business tax filing.
  • Field Audit: The type of audit that has given the name a bad reputation. In this situation, an IRS employee will come in person to view your business records.
  • Examination/Interview Audit: In this situation, you might be asked to visit the IRS office to provide documentation or receipts to back up claims.

Just because an audit is happening, doesn’t mean that your stress levels need to go through the roof. You can relax if you know that your records are in order. The best way to stay on top of the financial tracking required to protect you in an audit is to have a professional accountant helping with your business management.

Accounting Services to Prevent an Audit

Instead of waiting for an audit to happen, there are a few things that you can do to reduce the likelihood of an audit. An experienced accountant will be able to offer specific recommendations catered to your personal situation. So, it is important that you have an experienced accounting team by your side throughout the year.

At Easier Accounting, we are experienced with small business accounting. If you are interested in more information, then you are invited to contact us right away: (888) 620-0770

Tips to Prepare for an Upcoming Audit

An audit can be a stressful time of year, especially if you haven’t been keeping up with the necessary accounting tasks within your company. Whether you are being audited by the IRS, or you have an internal audit scheduled, it is important that you are prepared in advance.

While the audit is in progress, it can increase the stress levels if you are chasing down paperwork and financial details. Instead of waiting for the audit to start, you can be prepared by gathering the information that will be needed for the auditor.

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Financial Tracking is Not a Burden

Some business owners view financial tracking tasks as a burdensome task. These things are a “necessary evil” in case an audit happens. But, the truth is that these financial management tasks are essential to help you maintain the financial health of your company. View it in a different way: instead of looking at audits as a negative experience, reframe the experience to be motivation to help you keep up with financial tracking throughout the year.

Keep Accurate Records

The most important thing that you can do throughout the year is to make sure that you are keeping accurate records of every financial transaction that comes through. Even small transactions need to be recorded because everything adds up in the long run. By managing these records all year long, it will be easy to provide the requested financial information during the time of an audit.

Regular Reconciliation

One important aspect of maintaining your financial records is to practice the habit of regular bank statement reconciliation. Check the bank statements and compare this information with the transactions in the financial system. If there are any discrepancies, then you will have the opportunity to track down the paperwork and correct the error.

Implement Effective Systems

Putting the right financial systems in place right now will save you the headache of auditing problems in the future. The best thing that you can do is work with a trusted accountant who can offer assistance to help with these efforts.

At Easier Accounting, we understand the nuances of working with small business financials. We know that it takes a lot of work to keep up with financial tracking, and our team is here to help. For more information about the services that are offered, we invite you to contact us right away. Call us today at: (888) 620-0770

Is Your Company at Risk for an IRS Audit?

An audit can be a stressful and unpleasant situation to deal with, and many small business owners are worried that the IRS might audit their financial records. The likelihood of auditing varies depending on the type of business that you have and the numbers that are coming through on your tax return, and it is essential that you work closely with an accountant at all times. An experienced accountant can help you to avoid the audit in the first place, and they can assist with the required tasks if an audit occurs.

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Business Categories with a Higher Risk of Audit

The IRS does not share information about the types of companies that they audit. But, there are a few trends that have been noticed and it seems like certain categories have a higher audit risk. These are a few red flags that might potentially trigger an audit:

  • Small Companies: Generally, small companies don’t have good systems in place for financial tracking and records. It is also likely that the company doesn’t have a financial professional to help them stay in compliance with tax laws. The audit rate might be even higher if the company receives most income in the form of cash.
  • Business Travel, Entertainment and Meals: It is essential to have the paperwork to back up these expenses, and most small businesses don’t keep the proper records. If you are writing off large sums for business entertainment and meals, then the IRS might thing that you are writing off personal entertainment and calling it a business expense.
  • Schedule C Losses: Do you have a tax return that shows a high salary in conjunction with a Schedule C loss? This situation might be a red flag to the IRS. Typically, a Schedule C activity is a hobby instead of a business, especially if the activity is a personal pleasure, such as travel writing, photography, sports, etc.

IRS audits can be unexpected, and the best thing that you can do is hire a good small business accountant to ensure that you are staying within the tax laws. Prevention is the best solution, to help you avoid problems if your business is audited.

Here at Easier Accounting, we are experienced with all types of small business finance. We are here to help with anything that you need, and we invite you to contact our team to learn more about the services that are available. Call us right away: (888) 620-0770