Foodman CPAs & Advisors: IRS Business Audit Services

IRS Business Audit: What You Need to Know

Understanding IRS Focus on Businesses

The IRS has intensified its focus on businesses after the enactment of the Inflation Reduction Act. The Strategic Operating Plan funded by the Inflation Reduction Act has led to an increase in audit rates, expansion of enforcement, and a focus on non-compliance among business taxpayers.

How to Handle an IRS Business Audit

When facing an IRS business audit, it’s essential not to panic but rather equip yourself with information to navigate the process effectively. Understanding the audit process, knowing your rights and responsibilities, and being prepared to appeal IRS findings are crucial steps to take.

Preparing for an IRS Business Audit

The AICPA offers guidance on how to prepare for an IRS Business Audit:

  • Respond promptly to IRS audit selection letters.
  • Forward all IRS correspondence to your tax expert for verification.
  • Review the Information Document Request (IDR) provided by the IRS Revenue Agent.
  • Determine the scope and nature of the audit.
  • Locate and organize relevant tax returns and workpapers.

Required Documents for an IRS Business Audit

Prepare the following documents for an IRS business audit:

  • General Ledger and journal entries
  • Bank statements for all accounts
  • Workpapers for tax returns
  • Reconciliations of book and tax income
  • Schedules K-1, K-2, and K-3
  • Depreciation schedule
  • Ending inventory records
  • Internal controls documentation

Income and Deductions Documentation

Ensure you have documentation for income and deductions, including taxes, interest, travel expenses, and more.

Handling Documentation During an Audit

Always keep copies of documentation provided to the IRS Revenue Agent and request a written acknowledgment for receipt. Your tax expert can help anticipate questions and assist in the preparation.

Consequences of Ignoring an IRS Audit

Ignoring an IRS audit notice can lead to additional tax assessments, penalties, and interest. It’s crucial to respond to all IRS communications to avoid further consequences.

Seek Professional Assistance

If you are facing an IRS Business Audit, it’s essential to work with a knowledgeable tax expert to navigate the process successfully.

Read More of this Story at – 2024-07-08 16:44:24

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