Contrary to what you may have heard, the Internal Revenue Service does not know much about your business when they ask for an audit. A few of the agents may have limited knowledge about the specific audit issues that pertain to your type of business. Usually, there has been no glaring error to trigger an audit. For instance the Internal Revenue Service representative knows want you do for a living but does not know how your business is run. Given there are so many businesses in our country, it is impossible that the Internal Revenue Service can know the details of each business. To say that you are paying only 1% or 10% of your gross income is misleading. In short you are the one that can advise the Internal Revenue Service of the true facts of your business.
If you have given an opportunity to tell the Internal Revenue Service about your business (yes, an IRS business audit can be a blessing), then you should benefit from it. You can take advantage of the situation, which can possibly result in a limited access to your financial records ensuring a good audit result in the end.
Where will the IRS business audit happen?
The Internal Revenue Service randomly selects a business for an audit with no set pattern of timing or location. Usually your business will be audited where your financial records are located to ensure access to all the books. It can also take place at another location as long as you bring all your records and books. There are times that taxpayers will ask that audit be conducted at the Internal Revenue Service office so that they have a limited access to the records. It’s always prudent to get advice from a tax professional on making these choices.
By law, the Internal Revenue Service auditor must perform the audit where the business is located. If you are in disagreement regarding the location, you can ask for another venue. However, you must be certain to bring all records to be made available to the Internal Revenue Service auditor. Forgetting something can cause delays and trigger suspicion. If the audit is going to help your business, you must allow the auditor access to your facility and you must be present to answer the auditor’s questions.
If you request another location to do the IRS business audit, you must have an adequate reason. Two examples are:
• Protecting the image of the business
• Avoiding interruption of the flow of your business
Most importantly, just because you are being audited does not give the auditor the right to interview your employees or observe how your business runs.