When you take into consideration the relatively small percentage of businesses audited by the IRS each year, you may think that you are particularly unlucky when the IRS singles out your small business for this purpose.
While going through an audit understandably can be nerve wracking and downright inconvenient, you still have a number of resources available to you to make this process smoother and less worrisome. If or when the IRS zeroes in your small business returns, you can use these strategies to beat an audit.
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1) Hire Professional Tax Advisers
Before you begin any preparations for your upcoming audit, you should first hire a tax firm to help you through this process. When you have tax professionals by your side, you can understand the audit better and know what your rights are before the process begins.
Once you are in front of the IRS auditor, you can also be guided through the examination and know for what information this organization is searching. Your tax advisers can explain the questions if needed and help you answer in a way that is beneficial to your situation. They can also negotiate for you and help you avoid paying more into taxes or penalties because of mistakes or oversights on your returns.
2) Prove Your Business’s Existence
If you have claimed losses for several years in a row, the IRS may be inclined to call your business a hobby instead of a legitimate enterprise. If this agency says that you are engaging in a hobby rather than running a business, you could lose tax benefits that are only available to small business owners.
Rather than accept your business being relabeled as a hobby, you should use the audit as a chance to prove your business’ relevance, if not existence. You can do this by showing records of profitable years, as well as any advertising or marketing plans that you use in your daily operations. Being able to prove that your losses are temporary and not typical can help you beat this attempt to downgrade your company.
3) Claim Missing Deductions
An audit can also be a prime time for you to claim any missing tax deductions on your returns. Claiming expenses like a home office or travel mileage can help make more sense out of your returns and also allow the IRS to give you a pass on this year’s audit. Once these expenses are added, your returns could have numbers that make better sense and seem to be more in line with running a business.
4) Be Brief
Getting caught up in the nervous excitement of the audit could compel you to give up unnecessary details about your small business. When you are being audited, you should be brief in your answers and only give the pertinent information that is being sought at the moment. Rambling on or divulging unnecessary details could give the agent more pause to delve deeper into your records.
While you are being brief, you should also remember to be polite. It may be natural for you to resort to using a curt tone or being snide while answering. However, your brevity should be paired with politeness when you are answering questions. Your pleasant answers could be better received than those given in a hostile voice.
5) Stick to the Relevant Year
Likewise, you should keep your answers to this year’s return only and avoid talking about previous years. Even if your previous years’ returns were perfect and immaculately prepared, you should still focus on the year for which you are being audited when answering questions.
In fact, the IRS may have no interest in your returns from previous years. If you start discussing those returns, you could confuse the agent and delay the amount of time it takes to resolve your audit.
6) Do Not Lie
Being brief should not be misinterpreted as permission to lie, however. In fact, you should be as honest as possible and answer questions clearly and accurately as what you can remember when it comes to your returns.
If you get caught lying to the IRS, you could face charges like perjury or tampering with evidence. Rather than face criminal charges in court, along with additional penalties and taxes, you should be honest and avoid telling falsehoods about your small business.
Once the IRS agent has rendered a decision in your audit, you do not have to accept it willingly. In fact, you can appeal the audit decision and ask for a review of your case.
If you decide to appeal, you should go into this process as prepared as possible. Having documentation on hand to prove your returns and hiring legal counsel should be a part of getting ready for an official appeal of your audit.
You have plenty of resources available to you as you face an IRS audit. These strategies can help you beat an audit and avoid penalties and additional taxes that must be paid to the government
So, if you have IRS Problems, Owe Taxes, have Past Due UnFiled Tax Returns and need IRS HELP – Take action today! You should work with a nationwide tax relief firm. Call Advance Tax Relief (800) 790-8574
If you think that you may need help filing your 2017 tax return and past due tax returns, you may want to partner with a reputable tax relief company who can help you get the max refund and reduce your chances for an IRS AUDIT.
Advance Tax Relief is headquartered in Houston, TX with a branch office in Los Angeles, CA. We help many individuals just like you solve a wide variety of IRS and State tax issues, including penalty waivers, wage garnishments, bank levy, tax audit representation, back tax return preparation, small business form 941 tax issues, the IRS Fresh Start Initiative, Offer In Compromise and much more. Our Top Tax Attorneys, Accountants and Tax Experts are standing by ready to help you resolve or settle your IRS back tax problems.
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