Small business owners need to maintain all tax documentation for at least the last ten years. The reason for this requirement is to remain prepared in the event that the IRS chooses to conduct a tax audit. This procedure is conducted to determine if the business owner paid their federal and state payroll taxes as expected. An attorney could help these business owners through an IRS audit and protect their rights.
Receiving Notification of the Audit
The IRS is required to submit a notification to the taxpayer before they begin the audit. This notification presents them with information about the tax year in which the error occurred. This allows the taxpayer to review their tax documentation and determine where an inconsistency could exist.
What Documentation is Needed by the IRS?
The IRS will need the tax returns for the given year. They’ll need the taxpayer to present them with additional documentation that applies to deductions and expenses. For business owners, they will need to present evidence such as receipts for their business expenses. This could include invoices for supplies, utility costs, and the rent or monthly payment for the business location.
Identifying any Possible Errors
The purpose of the IRS Audit is to identify any tax year in which the taxpayer didn’t pay the correct amount of income taxes. The tax audit is conducted at random and isn’t used to target specific taxpayers. If the agency identifies errors, the taxpayer must provide evidence to show if the agency’s claim is valid. If the taxpayer did pay the correct amount of taxes, the audit won’t present a negative impact on the taxpayer.
When You Owe Back Taxes
If the agency identifies overdue tax payments, they can take legal action against the business owner. They can present the business owner with the exact value of the overdue taxes and provide a deadline for payment. If the taxpayer is unable to pay the balance in full, they need an IRS audit lawyer to negotiate with the IRS to achieve a settlement. This settlement could equate to a value below the exact amount owed to the IRS.
Small business owners must complete their tax returns as directed by the IRS. This includes reporting all income sources for the applicable tax year. By reporting their income, they can calculate the exact value of their tax implications without error. Business owners who are facing an audit should contact an IRS audit attorney for further assistance.