Small Business Audit Lawyers
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What Do I Do if I Am Going to Be Audited?
There are three things you should do to prepare for an audit:
- Locate all records that prove your tax return
- Identify problems backing up income sources or expense deductions
- Neatness is important
What Should I Bring to the Audit?
There are several items you should bring with you:
- Bank Statements, Canceled Checks, and Receipts
- Electronic Records
- Books and Records
- Appointment Books, Logs, and Diaries
- Auto Records
- Travel & Entertainment Records
- Expenses for Renting or Buying Property
Bank Statements, Canceled Checks, and Receipts
As a rule, don't discard any business-related canceled checks, invoices, or sales slips. If you paid some expenses with cash, keep the paperwork showing the payments.
Bank and charge card (Visa, MasterCard, American Express) statements are now accepted by the IRS as proof of payment. They must show the name, the date, the amount, and the address of the payee.
Books and Records
The auditor will ask to see your "books." The tax code doesn't require small businesses to keep a formal set of books. Checkbook and cash register tapes are acceptable forms of recordkeeping for small businesses. If you maintain more formal records such as ledgers and journals, the auditor is entitled to see them. If your data is on a computer, the auditor will want to see a printout.
Appointment Books, Logs, and Diaries
An entry in a business diary helps justify an expense to an auditor as long as it appears to be reasonable. Additionally, you must keep special records for certain equipment, called "listed property," that is often used for both business and personal purposes (e.g. cell phones, laptop computers, and vehicles).
Business use of your personal auto requires detailed records showing the work portion.
Travel & Entertainment Records
By law, out-of-town business travel and entertainment expenses require greater recordkeeping than most other expenses. You must have a written record of the specific business purpose of the travel or entertainment expense, as well as a receipt for it.
Expenses for Renting or Buying Property
To prove business rental expenses, bring in a copy of your lease. If you purchased the property or equipment, have the purchase contract. This establishes grounds for claiming these expenses as well as a beginning tax basis of the property, if you claim depreciation expenses.
Should I Consult a Lawyer When Preparing for an Audit?
Preparing for an audit can be both difficult and time consuming. An attorney can assist you in the preparation process to help you get through the process. An attorney can also help you sift through financial documents to determine what is relevant to the audit and to ensure that you are not missing important documents.
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Last Modified: 11-28-2011 04:33 PM PST
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