Running a successful business requires tax compliance. Not only does an individual have to pay taxes on what income they earn personally, but they also have to ensure that the organization they operate fulfills its federal income tax obligations.
Those obligations may range from withholding funds on behalf of employees to paying appropriate taxes on company revenue. Businesses benefit from a variety of write-offs and deductions that can limit tax responsibilities. Generally speaking, businesses try to use every possible write-off and deduction to limit what the company pays in taxes.
Unfortunately, efforts to diminish tax liability can sometimes lead to tax controversies. The Internal Revenue Service (IRS) can be quite assertive about holding businesses accountable for unpaid income taxes. In some cases, an audit may be necessary to determine whether an organization has fulfilled its tax obligations.
What typically happens during an IRS audit involving a business?
Every audit scenario is unique
Many people imagine a tense sit-down meeting at an IRS field office when they receive notice of an upcoming audit. There are many audits that require the in-person presence of a taxpayer or business representative at an IRS facility.
However, not all audits actually take place at IRS offices. In some cases, business owners simply need to provide financial records to the IRS for review. In such scenarios, it is possible to submit all necessary documentation via mail without having an in-person meeting.
Other times, company records may be so extensive that sending copies or physically taking them to an IRS location could prove to be prohibitively difficult. The IRS may conduct an audit on-site at a business. A professional comes to the business to go over financial records while working in-house with company employees or leadership.
In each of these scenarios, the accuracy of the financial records is of the utmost importance. So too is the proper communication with IRS professionals. Business owners facing an audit often experience intense negative emotions. They may struggle to remain calm when dealing with the largest and most powerful collection company in the world. Business owners facing a tax controversy or an upcoming audit have the right to legal representation throughout that process.
Securing the right support when dealing with IRS tax issues can allow business owners to focus on company operations instead of the minutia of the tax controversy. The right support can minimize the stress involved in an audit and may reduce the likelihood of an unfavorable outcome that results in payment obligations or criminal prosecution.