Preparing for a Tax Audits

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Small businesses have a lot of hurdles to go through as part of the journey towards success. One of them might be handling tax audits. Time and again, the IRS may try to look into certain tax paying businesses and consider some of them up for audit. Small businesses may not usually be aware if they are a particular candidate, but it surely pays to be always prepared.

Effective Preparation

The best way to handle tax audits is to prepare for it beforehand. Even before a tax auditor comes knocking at your door, make sure that you have prepared yourself for such a visit. This would mean that you have all the documents in check and all of them well organized. But you must also take note of what documents to bring to a tax audit and what the auditors usually will require from your small business.

Things To Bring To Tax Audits

It pays to have an organized system of your business records. That would help ensure that you have all the documents all accounted for. Since the tax audit will be based on your tax returns, you have to show proof that the tax return filed is based on good business records. Here are some of the documents that you might need to have with you during the tax audit.

Bank Records

During tax audits, you may be required to furnish all your bank records. This would include all your bank accounts, both personal and for business purposes. This might also include having bank invoices and sales receipts on hand as evidences for cash purchases. Make sure also that you keep even the canceled checks on hand. Since banks do not practice returning canceled checks anymore, you might consider keeping electronic records of such that the banks have been issuing lately.

Books And Records

Small businesses are not required to keep a formal set of books. But it pays to maintain one just to to have the business show more transparency. It may be as simple as a ledger or a journal of sales and collectibles. Such records can help make tax audits easier to go through than not having any formal record at all.

Contracts

This might also be needed to establish business relate4d transactions. If the business is renting office space, a lease contract would be something that an auditor would look for. There might be other lease contracts for other properties and equipment that should be on hand in case the auditor asks for them.

Small Business – GuideTo.Com

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