Tax audits are a standard process to which businesses are subjected to. If it’s normal, then why do people dread it? Some may say that it’s because of the severe punishment if their business doesn’t pass it, but many failed audits are caused by lack of preparation.
People are quite often intimidated by a tax audit that they end up putting themselves in an even more compromising position. People who panic over a tax audit will most likely be unable to justify their business expenses. They lose focus on that, which is the main objective of conducting auditing on business tax.
Keep in mind that just because you committed a mistake doesn’t mean you’ve done something illegal. Don’t lose your head, and plan your approach to get through this process as best as possible. Keep reading to learn about the best ways to prepare for a business tax audit.
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Gather all necessary records and arrange them neatly
Remember that you don’t have to collate everything, just what’s necessary. But you can also have other records arranged in order just to be sure. The coverage of the tax audit depends on how comprehensive the auditing agency is going to do it.
The auditing body will usually specify what their audit will cover, so you just have to prepare records corresponding to it. Check everything that you deem is important, so you don’t miss anything. Put effort into recovering and reconstructing lost or destroyed records, and be sure to document them, so you have something to show the auditors in case you fail.
After gathering what’s needed, you have to sort and organize them. If you present your receipts, bank statements, etc., in an organized manner, the audit will go smoothly and quickly. Neatness also appeals to auditors, who are mostly accountants themselves.
Don’t go through the audit alone
Whether you own a small business or a large corporation, an audit would mean getting all the help you can get. It’ll be difficult to try and tackle it on your own, even if you have accounting experience. Find every resource possible that can help you and invest in them if you have to.
Get in contact with a firm that does property tax audit if necessary. Private firms are filled with experts in this kind of matter; therefore, they can provide you with much-needed assistance. You have to do this once you receive the letter of audit from the auditing agency so you can make the proper arrangements and send a well-crafted response.
Know your rights under the law
You can do certain things to have enough time to respond to a letter to audit or prepare for a tax audit itself. In most cases, you can ask for an extension to have more time to plan for the audit. Make sure that you don’t do anything that can raise red flags.
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That is why you need to have legal counsel with you. Ensure that you don’t step over the law’s limits when you’re extending the date of audit. Tax firms usually provide representation, which can help you exercise your rights as a taxpayer to your businesses’ advantage.
It’s always better to be prepared for tax audits. Get all the help you need, know what’s outside of your taxpayer rights, and organize all necessary paperwork and files. Focus on what needs to be done, and before you know it, auditing is finished.