Tax season might be over, but that doesn’t mean you’re safe from the IRS. Businesses of all sizes in Ohio can face tax audits, which can feel stressful and overwhelming.
But don’t panic! Here’s a breakdown of what to expect and how to prepare if your business gets chosen for an audit.
What is a tax audit?
Think of a tax audit as a double-check on your business tax return. The Internal Revenue Service (IRS) will review your tax forms and documentation to ensure everything is accurate and you’ve paid the correct amount of taxes.
Why do businesses get audited?
There are a few reasons why your business might get picked for an audit. Sometimes, it’s random, but it can also happen if the IRS notices something unusual on your return. This could include:
- Large deductions or credits: Claiming a lot of deductions or credits can raise a red flag for the IRS.
- Inconsistent numbers: Make sure your income and expenses match up across different forms to avoid triggering an audit.
- Cash-based businesses: Businesses that deal primarily in cash can be harder for the IRS to track income, so they might be audited more often.
If you know ahead of tax season that your business is likely to be audited, you may want to talk to a skilled tax attorney about how to prepare for tax time.
What to do if you get audited
If you get a letter from the IRS saying they’re auditing your business, take a deep breath and stay calm. Here’s what to do next:
- Contact a tax professional: An experienced accountant or tax attorney can guide you through the audit process and represent you if needed.
- Gather your records: Start collecting all your business tax documents, like receipts, invoices and bank statements. The IRS will ask to see these to verify your income and expenses.
- Be honest and cooperative: Working openly with the IRS auditor will go a long way. Answer their questions honestly and provide all the documents they request.
While federal tax law applies throughout the US, Ohio also has its own business taxes. Be sure you’re filing all the necessary state tax forms and paying any applicable state taxes to avoid complications during an audit.
Keep in mind that an audit doesn’t necessarily mean you’ve done something wrong. By staying organized, keeping good records and seeking professional help if needed, you can navigate a tax audit with confidence.