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What You Need to Know if Your Business Is Being Audited by the IRS

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San Antonio IRS Audit DefenseFor any taxpayer, the possibility of an IRS audit is worrisome. However, this can be a concerning issue for business owners, and especially so for those who own small businesses. If the IRS believes that mistakes were made on a business’s tax returns, the business may owe additional taxes, and penalties may also apply in some situations. Business owners who have been contacted by the IRS for an audit will need to understand how they should proceed, including the types of information they should provide and the steps they should take if they need to appeal the results of an audit.

Understanding IRS Audits for Businesses

The IRS may select a business for an audit if it believes that there are errors on one or more of the business's tax returns. These errors may be due to mistakes or because the IRS believes that information was reported incorrectly. Businesses that deal mostly in cash may be targeted for audits because the IRS believes that income may have been underreported. Deductions for business expenses are another common issue that can trigger an audit, and the IRS may look at expenses such as travel, meals, and entertainment.

Audits may be conducted by mail, but in most cases, the IRS performs field audits for businesses. In these cases, one or more IRS agents will visit the business’s location, speak to the owner or other personnel, and review business records. These audits can be very extensive, looking into all aspects of the business, reviewing its finances, and ensuring that information is reported correctly.

IRS audits will generally be based on a tax return that was filed within the last three years, and the IRS may look at tax returns for up to six years. A business should be prepared to provide all financial records for the year in question, as well as any records from after the date the tax return that is being audited was filed. The business may need to provide a detailed explanation of its accounting system to the IRS, ensuring that agents have a full understanding of its finances and are able to identify the sources of any errors that were made.

After an audit has been completed, the IRS may agree that the information provided on a tax return was correct. However, in many cases, the IRS will propose adjustments to a tax return and state that taxes are owed. A report of the IRS’s findings will be sent to the business. This report is known as a “30-day letter,” since a business will have 30 days to respond. In the response, the business may agree with the IRS’s findings and make arrangements to pay the taxes owed, or it may file an appeal in the U.S. Tax Court.

Contact Our San Antonio Business Tax Audit Consultant

At E. Villanueva & Associates, Inc., we can help you determine the best way to respond to an IRS audit. We will work with you to provide all of the requested information, and we can help you take the correct steps to address any taxes that are owed. We will work to help you minimize your tax burden and avoid issues that may threaten your business’s ability to continue operating. To set up a free consultation and learn how we can help with your tax issues, contact our Corpus Christi tax consultant at 210-382-9015.




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