There is nothing more frightening for Manhattan entrepreneurs than being notified of an impending business audit. Even if you make every effort to file your taxes accurately and in a timely manner, one small oversight or error could be working against you. To this end, knowing how to mitigate damage caused by an IRS audit is crucial to lasting commercial success.
First and foremost, CNBC recommends paying close attention to your record-keeping procedures. The IRS is allowed three years to audit a questionable return from the date it is filed. Accordingly, you should keep previous returns (along with any relevant back up documents) for at least that long. The standard time frame for an audit to be triggered is generally from 12 to 18 months, so don’t assume your business is safe just because the IRS hasn’t responded immediately after you’ve filed.
The good news is that most audits result from minor inaccuracies in your business’s tax return. This is known as a correspondence audit, during which the IRS will request additional information about your return. If you can produce the proper documentation (thereby allowing the IRS to correct any errors), you will experience a relatively painless procedure. However, more substantial errors may trigger a field audit, which will entail a physical review of past returns by an IRS agent.
Knowing how to identify any potential issues can help you reduce your risk of being audited in the first place. Because math errors are quite common (and easily fixed), be sure to double check all calculations before filing. Also, review any deductions being made on behalf of your business to make certain you are within allotted limitations.