Posted by Dixie Walters on Monday, April 21, 2014 - 00:00
Tax matters may still be on the minds of many business owners who are breathing a sigh of relief after filing their tax return. But what if the IRS red flags yours and this isn’t the last you hear about that return?
First, take heart in knowing that your chances of getting audited by the IRS are fairly slim — by most estimates, only 1 percent of those earning under $200,000 have been audited in recent years. But some business and individual filers are likely to face closer scrutiny, including those that are high-income, those with higher-than-average deductions and taxpayers with complex returns.
If you find yourself on the other end of an IRS notification, pause and take a deep breath. Then take comfort in these assurances:
You’re unlikely to face a sit-down with an IRS agent.
An in-person audit with an IRS representative is increasingly rare. So-called “correspondence audits,” where you respond by mail to requests for additional information, are far more common. Either way, no one likes to receive an official notification from the IRS. If an in-person audit is requested, you can be represented by a tax professional.
Having your return selected for audit or being asked for additional documentation doesn’t mean you’ve done anything wrong.
Returns are often chosen randomly or as a result of computer screening based solely on statistical formulas. For instance, if you give more to charity than others at your income level, your return could be flagged and investigated further simply because your giving is higher than the norm. Assuming you can produce records of all your charitable giving, your interaction with the IRS might be as simple as supplying additional documentation by mail.
The best defense is a good offense.
Read any notification you receive carefully and make sure you understand exactly what is requested. Be thorough in complying with requests. If you respond promptly and professionally with the right information, you can probably resolve the matter more quickly.
Help is out there.
Upon receiving an IRS notice, many business owners consult with their outside accountant if they have one. But what if your accountant is busy handling urgent matters for dozens of other clients? If you need more personalized support, especially if an in-person audit is required, hiring a tax professional on an interim basis might make sense. Robert Half Management Resources can supply businesses with tax experts who have attained the certified public accountant designation and other professional credentials. Many have expertise in specific areas such as corporate income tax, sales and use tax, property and real estate tax, and international and expatriate tax.
If the IRS does come calling, the good news is you don’t have to fly solo when it comes to resolving the questions at hand. Don’t hesitate to enlist the help of an interim professional who “speaks tax code” and can satisfy Uncle Sam while you keep your focus where it belongs — on your business.