Can My Company Survive an Audit?

Every company dreads one word above all others – even the word 'lawsuit'. What would that horrible word be? Audit.

Even the thought that an audit could come about makes business owners cringe. People have different ideas of what happens. The reality can be far less traumatic than the whispered rumors. You will still go through a lot of stress with an audit, but as long as you follow some simple rules you can avoid too much terror.

Don't Delay

When and if you receive a notice from the Internal Revenue Service concerning an audit, don't put off replying. The notice will give you a certain amount of time to reply, usually about 30 days. Gather all requested materials and send them as soon as possible. You may also wish to retain a lawyer or at the very least, consult with a tax professional. Responding as soon as you can will reduce the possibility of fines for being late. You will also eliminate placing the notice in a place where it can be lost or forgotten.

Make Copies

Never give the IRS original documents. Make copies of everything they ask for. If documents are lost or damaged by the IRS they are not responsible for the loss. Having copies gives you extra protection against loss or damage. If the IRS does lose a copied document you can give them another without scrambling to replace original documents. Also, never take more documents to an audit office than what they have asked for. Some tax professionals say that if an agent asks for something you do not have, but has not been requested, they will likely move on to another topic if you tell them the documentation is at home.

Breathe Deep and Relax

An audit is stressful, but it doesn't have to mean the end of your company. Having copies of all needed documents and conducting yourself in a polite manner will go a long way toward preserving your sanity. Not to mention your company. If there are mistakes on your part, admit them and ask for guidance. The people that work for the IRS are just like you – they're doing their job. They have their own worries and unless someone is on the offensive with them, they're almost always helpful. If you need help or need questions answered just ask for help.

At any time that you feel you are unable to go through the audit on your own, hire a lawyer.

An attorney that deals with tax law can help you work through an audit and if you owe money, help you form a deal to pay the IRS on better terms than those set forth by the government.

Other tax professionals may give you some guidance, but having a professional tax staff member or hiring a tax company to help with your company before ever encountering an audit is the best medicine.