The end of the fiscal year can be a stressful time, especially for owners of small businesses. While audits can be initiated based on tax issues or deviations from the norm, many companies are randomly selected for one. The IRS only audits a tiny percentage of companies annually, but it’s still crucial to have your financial accounts and information squared away before tax season hits in case the audit fairy does knock on your door. There are several things you can do to be sure your business can pass an audit with flying colors.
Keep Records Current
Having up-to-date accounting records will go a long way in saving time and hassle in both preparing your taxes and having them scrutinized by an auditor. Keep records throughout the year of transactions, employee benefits, payouts, and other financial information. Have these records organized and easily accessible. Keep your auditor apprised of changes in your business.
Designate a Team
You may have a financial team already in place, or you may want to assign several employees the task of reviewing statements and records in preparation. Prepare a timeline of tasks, organize your folders, and make sure at least two sets of eyes check everything for accuracy. Smaller internal audits can also be a great way to stay abreast of your tax situation.
Do Your Due Diligence
There are some excellent tax information resources online to help you stay current on the latest regulations and accounting standards. Doing some research can help you avoid the pitfalls of failing to check that one box or not filling out that one line on a form, which can take hours upon hours of precious time to remedy during your audit. It may seem tedious now, but an ounce of prevention is worth a pound of cure. Before fieldwork begins on an audit is a great time to ask questions of your agent. They are a valuable resource and they want you to succeed.
Audits don’t have to be scary or intimidating. While they do take up time and can be draining, they are also an important piece of the economy’s function. The process of meticulous examination helps build public confidence and customer trust. Knowing an audit could strike at any moment provides extra incentive for companies to stay honest and that shores up the entire economy. Keeping this in mind, the process of going through an audit with proper preparation can be surprisingly smooth and successful.