TWO SMART WAYS TO PROTECT YOURSELF IF YOU GET AUDITED
If you're in business,
you have around a 1 in 100 chance of being audited by the IRS. If you run a
business from home, your chances go up about four times. As long as you keep
your books in good order, though, an audit is nothing to be scared of. The
IRS won't audit you just to harass you. They just want justification of
certain items on your tax return. There are two important things to do if
you get audited, though, that can protect you and your business from undue
problems.
When the IRS notifies you that you will be audited, they will give you the
choice of having the audit meeting at the IRS office, or your office. ALWAYS
HAVE THE AUDIT TAKE PLACE AT THE IRS OFFICE! Many business people think that
they should have the audit in their own office, so they feel more comfortable.
This is the WRONG thing to do. If you let the IRS agent into your office, you
have given him or her the opportunity to view your whole operation. They will
definitely be looking for other things to question you about, besides the
original audit item. If you have the meeting at the IRS office, it forces the
agent to focus on the original item.
The second thing you should do goes along with the first. When you go to the
IRS office, THE ONLY PAPERS YOU SHOULD TAKE WITH YOU ARE ONES DIRECTLY
CONNECTED TO THE POINT OF CONTENTION! If the IRS has a problem with a certain
deduction, say travel expenses, take the receipts that will back up the
deduction, AND NO MORE! If you take your complete set of business records,
the agent is sure to take some time "looking for backup information" for your
deduction. In reality, they will be looking for other, unrelated items that
don't "look right." If you have the meeting in your office, they have every
right to look through your files for the same things.
In other words, the smart thing to do is only give the IRS access to
information regarding the items they are auditing you for. They will let you
know the reason for the audit beforehand. This gives you the knowledge you
need to protect yourself and your business from audit nightmares.
