Our Philadelphia business owner clients come to us for lots of different reasons.
Whether it’s merely for straight tax work, cash flow management and forecasting, or direct accounting assistance, we wear many hats on behalf of our favorite business owners.
But here’s something for which a few of our Philadelphia clients didn’t even realize they needed us … until they did.
It’s not a happy subject, but it’s something about which every business owner should be aware. And prepared for.
(Oh, and a reminder: less than three weeks until April 15th. Act accordingly.)
Outlining What Occurs During A Business Audit For Philadelphia Businesses
“The best preparation for tomorrow is doing your best today.” – H. Jackson Brown Jr.
The issue we’re tackling today might overwhelm you because of what it means for your business. But there’s a simple, helpful solution — have us handle all of it for you. Please reach out if you find out the IRS is auditing your business. We’d love to help in any way.
Before I dive into some ways you can prepare for a business audit, allow for a quick refresher:
IRS audits are often not initiated at random. The IRS will likely audit businesses with glaring errors from business taxes filed the year before (i.e. when they sense something is up). These tax audits cover a number of areas such as employment and income tax. They are comprehensive and not something to take lightly.
Again, the importance of business audits is why we believe a professional service, like the one we provide, is something you should commission were an audit to happen.
But if you choose to face the audit yourself, here are some ways to prepare.
1. The most important item is that any third-party income and reports agree with your records. This is why it’s crucial to maintain all such expenses throughout the year.
2. Fill out all the correct forms. Is the audit you’re going through a correspondence audit? Office audit? Field Audit? Each type of audit will dictate which forms you need to fill out.
3. Tax auditors will first request your checking, savings and investment account information. Make sure you have all the deposit records on hand from the year prior.
4. Is your business bank account free of irregularities? Good. The random, large expenses will only hurt you in the long run and give the IRS something to call into question if it doesn’t line up with your business’ trend lines. If you do have those outliers, it’s important you prove the necessary documentation to back those purchases.
Side Note: it’s imperative you keep business and personal accounts separate throughout the duration of the audit.
5. Measure twice, cut once. It’s vital to double- and triple-check your information when filling out necessary audit forms. Get a second (and maybe third) pair of eyes from someone else on your leadership team when fulfilling each mathematical response. FOR INSTANCE, balancing your total deductions with your income is important. Extensive deductions adding up to a significant portion of your income will sound audit alarms for the IRS. Get those numbers right with attention to detail.
Our goal is to prevent any “audit fear” in the first place. How do we do that? We help you year-round so that come tax season, your needs are handled by a pro.
Doesn’t that sound better than fearing the process? If you think so, then give us a call so we can help your business before you have to go it alone.
There is strength in numbers … that’s why we have your back.
Feel free to share this post with any of your Philadelphia business associates or clients you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.
M. Sexton, CPA PC