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How to successfully navigate a New York IRS business audit

On Behalf of | Jan 25, 2023 | Corporate Litigation

If your New York business has received a letter from the IRS informing you of a looming business audit, you might feel a few pangs of anxiety, even if you filed your tax return timely and accurately. However, preparation is vital to getting through the audit, and the following steps can increase your odds of a successful outcome.

Before your audit begins

Become familiar with the audit process so you know what to expect and how to prepare. This step can alleviate a good amount of anxiety. Prepare by gathering all relevant documents. Include documentation and support for all business income and expenses, such as bank statements, receipts, invoices and bills. In addition, gather any additional documents the IRS may have requested.

Perform a detailed review of the tax return under audit. You may need to explain specific methodologies used to calculate your taxes for the audit year, mainly if you used a different method than in previous returns. Additionally, gather all records that support the numbers in the tax return, and be prepared to explain how you or your tax preparer came up with the numbers on your return.

Gather as much support as possible

Consider hiring a tax professional or accountant to help you prepare your information and represent you during the audit process. Additionally, if you have claimed tax deductions or benefits, be prepared to substantiate your right to take them. Research applicable corporate tax law if needed.

Organize all your records for easy access and recall so that you can promptly satisfy data requests from the IRS. Neatness counts, and you may receive the benefit of the doubt on some issues if your records are generally neat and orderly and don’t require much digging from the IRS auditor. The auditor will expect written proof of expenses and other data, although they can accept the oral defense. If you choose not to provide adequate documentation, the auditor can use their estimates and financially penalize you for failure to keep records.

Ensure the best outcome for your business

As you go through the audit with the IRS representative, it is essential to remain cooperative and honest. Keep detailed notes on every phone call, email, letter, or other interaction with the IRS regarding your business audit. You might need to go back through the information as you gather data.

Understand your rights as a business taxpayer while you undergo the audit. This awareness will help if you get into a situation that requires legal advice. Once the audit is finished, if you disagree with the outcome, be prepared to appeal the IRS decision. You can succeed with solid documentation and a thorough, fact-based appeal.

Although an IRS business audit can feel nerve-wracking, you can make it through successfully by preparing thoroughly and getting professional help as needed.