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Tips for handling an IRS corporate audit

On Behalf of | Jan 20, 2022 | Tax Law

In New York, an IRS corporate audit is required to review the accuracy of a business’s financial activities. This includes a detailed review of tax returns and accounting documents that accumulated over the past several years. There are several methods recommended to prepare for an IRS corporate audit.

Collect relevant documents

During an audit, the auditor will review your business’s tax reports and financial documents. Certain details that this professional looks for are the business’s income, profits, expenses, withdrawals, and deductions according to state and federal business tax laws. You can avoid paying tax penalties by providing the right documents for review.

Know the timeframe

The average audit is a review of the past two years since you filed your tax return. In complicated cases, the IRS may decide to review six years of tax documentation.

Know the type of audit

There are two main types of audits: correspondence and field. A correspondence audit is sent through the mail by the IRS and is mailed back with the corrected tax form and a copy of the documented evidence. A field audit is a meeting that is conducted in person by an IRS auditor. This meeting takes place at home or in a nearby IRS office or tax provider’s office. An understanding of business and commercial law can help you before, during, and after the audit.

Audits do not occur often

A business that undergoes an audit should not expect to receive another one anytime soon. Less than 1% of all U.S. tax returns are subjected to audits. If one is received, it is often taken very seriously and prepared for months in advance.