Help your Business Emerge from an IRS Tax Audit Owing Nothing (as Opposed to Owning Nothing)

No business wants to tangle with a snorting and charging IRS (come to that, no individual person hopes for that either). Small businesses can be especially vulnerable to an IRS tax audit - in particular, ones like small stores and restaurants that do a lot of cash business. Mistakes happen when you handle cash. Any time a business finds itself marked by the IRS they know that it doesn't matter if they are found innocent of any tax law abuse in the end - it's going to cost them a lot of money and a lot of time. Not to mention everyone's going to go home with an ulcer in the end.

There are things you can do though, that can help you go through the ordeal with the minimum fuss possible and help you emerge at the other end owing nothing (as opposed to owning nothing).

When you receive notice that you are under IRS tax audit, that isn't to send you into a panic. Most audits aren't the body cavity-search experience that you hear they can be. Usually, all they want is a little reassurance that some math error somewhere is only a clerical mistake. Sometimes, they'll find that the numbers on your 1099 doesn't agree with the figures on the company return. If you could just do a new tax form or give them the right document, they'll just go away (they have other people to torture, you know). Sometimes, there are certain deductions that entities like real estate investment businesses can claim that wouldn't apply to other businesses. The auditor will just want to know that all is on the up and up.

Not even accountants and CPAs deal with the IRS on their own when they have the bad luck to get audited. It's stressful for them too. CPAs hire CPAs or tax attorneys when they are audited. It takes emotion out of the experience. A self-composed professional can zero in on problems in an IRS auditor's assertions. The tax law isn't black and white in all places. A lot of the time, laws can be open to interpretation. And an auditor, can choose to take a hardline for no reason. It takes a knowledgeable tax authority to be able to argue with such an auditor.

Remember how in the movies the police always say that anything you say can and will be used against you in court of law? That applies to audits to. In your to appear cooperative, you might volunteer information that they could use against you. Remember that you're not to the trust the IRS (not that you would need to be told that, but people tend to forget when they feel threatened). You want to give the IRS exactly as much as they ask and no more. If possible, answer everything with a yes or no.

In the end, you don't want to assume that whatever the IRS tax audit contends is right. They are as liable to make mistakes as anybody.