Surviving the First IRS Audit
Sooner or later, your client can obtain a letter from IRS stating that it will be subjected to audit. Due to the fact that most tax payers are normally intimidated by IRS and prefer not to deal with it, the tax preparer can arm himself by making some preparations. In case this is your first time, the following are useful tips for dealing with an audit from IRS on a client’s behalf
Required Records
Firstly is to coach all your clients on how to properly maintain records. An audit preparation needs to start long before the commencement of an audit. If you want to be ready and not get caught unaware for an audit, all clients should be coached regarding record maintenance in order for them to always be ready for any type of audit. This involves making some of the following preparations:
· Maintaining primary records of payments and receipts
· Maintaining secondary records such as spreadsheets, mileage logs or other information in summary
· Maintaining tax returns
· Keep any back up information for the past three years as well as that of the current year
· Ensure that all business clients maintain separate business bank accounts. It is only the business income that should be deposited here and payments made should only be legitimate business expenses
In case the audit is subjected to just a particular issue, your client needs to gather all the applicable documents on the issue at hand. The letter received from IRS by your client states all the items in question. In case one needs more time to gather, a request should be done in advance prior to the examination date.
In case the entire return is being examined, it is natural that the requirements of the documentation be more extensive. If the return being subjected to audit is a business return, it is possible that the auditor will perform an analysis of bank deposits. This is one of the major reasons why your clients are expected to maintain separate business bank accounts.
These tips also helps a client in building confidence as he carries out his business as he will know the legal requirements expected of him.
Start free ReadyRatios
financial analysis now!
start online
No registration required!
But once registered, additional features are available.