What’s worse than filing returns and paying taxes? It’s the tax audit. Let’s be honest, no individual or business wants an IRS audit. Even if you have done everything by the book, the time and efforts required at your end are enormous. Normally, tax audits for individuals are rare.
On the other hand, big businesses have expert teams to handle such audits. But the real problem is often for small businesses where owners have to manage everything on their own.
Tax audit by the IRS can be a nightmare in such a situation. Are you worried about a tax audit in West Covina, CA, and wondering how you prepare for it? Read this article if this is the case with you, as we are going to share crucial tips in this regard.
How Do You Prepare For A Tax Audit In West Covina, CA?
1: Do Not Panic
First of all, you don’t need to start worrying about the news of an audit. More often than not, auditee is selected by random sampling. So, unless you have something to hide, you need not to panic.
You will be alright as long as you comply with audit instructions.
2: Clear Your Schedule
If you are the sole owner, or someone who will be responsible for facilitating audit, start scheduling accordingly. The fact of the matter is that a lot of time is required to satisfy the audit team. So, start clearing your schedule for the upcoming months till the period of audit.
Reschedule important meetings or engagements.
3: Understand the Nature of Audit
All audits are not equal. Carefully read the notice from the IRS to understand the true nature of your audit.
At times, audit simply means the IRS demanding additional documents via mail. Sometimes it could be related to a specific segment of your overall returns, such as sales figures.
Other times, audit might mean proper audit of all documents at your place of business. So, make sure you understand the nature of audit. It will help you in making relevant arrangements in advance.
4: Start Organizing
Now that you are aware of the timeline and nature of the audit, you need to start practically.
Organize your affairs and documents.
Start with documents that are most likely to be demanded (or have already been demanded).
Make sure all relevant documents are readily available. Also make sure that they represent the true picture of your financial affairs, as per your returns.
Remember to provide only those documents that you are specifically asked for.
5: Embrace Yourself for Questioning
From casual questions to formal pro-forma, the IRS may seek information in various forms. So, be prepared mentally. Also, make sure that your managers are ready to face the IRS. This is especially true if the IRS finds some contradictions in your returns and actual documents.
While such questions are straightforward most of the time, many people still panic. If you can guess the likely questions (as one can in some cases), it is recommended to prepare responses well in advance.
6: Hire a Tax Expert
You may need a tax professional to deal with the audit, especially if it is being conducted at the workplace.
A tax attorney may also challenge the premise of a tax audit to save you time and effort during the audit.
Normally, a tax expert will help you gather documents and present them to the IRS in a more suitable form. Hiring a tax expert may also mean that you need not to worry about the audit affairs. Instead, you can simply utilize your energy towards the business operations.
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Zee Maq is a content writer who specializes in writing business and finance content. She has nine years of experience and loves to provide problem-solving content to help people tackle challenges in their everyday lives.