You may feel understandable trepidation after finding out the IRS plans to audit your business. Try not to panic, though, as doing so may complicate things further. Instead, try to focus on gathering all the documentation and evidence you might need to explain why your business filed its taxes in the manner that it did.
Per H&R Block, the IRS has up to three years after you file your business tax return to initiate an audit of your business. The IRS often conducts personal tax audits at random. Yet, this is not common when it comes to business audits. So, if the IRS decides to audit your business, it typically has one or more reasons for doing so.
What to expect during a business field audit
Most IRS business audits are field audits, meaning they often involve an IRS agent coming to see you at work. During the field audit, expect to have to answer questions about your business’s accounting and recordkeeping systems. Prepare, too, to answer any questions the IRS may have about deductions you claimed or unexplained bank deposits you made. You may also have to answer questions not directly related to your business, such as questions about your home and family life, during the audit.
What to bring to a business field audit
It is important that you show up to the meeting with the original audit letter you received from the IRS along with any other documentation the service requests. You should also bring copies of the last few years of your business tax returns and copies of any other correspondence received from the IRS.
If you disagree with the results of your business tax audit, you have the option of appealing the decision.