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.
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