Even though you have organized your business records well, the Internal Revenue Service may have some random questions you did not expect. The frequently asked questions they are likely to ask are:
- Describe your day-to-day business activity.
- How many employees do you have?
- What is the name of your accountant?
- What was the amount of your starting capital and how much did you earn by the end of the year? (Be careful when answering these questions. The Internal Revenue Service will use this information when examining your filed tax return.)
- What is the name of the bank where you hold your business accounts?
- Provide proof of your present income and all necessary documents supporting your tax reporting.
- What is the method used by your accountant to determine your business income and expenses?
- If you have a business loan, provide your agreement with the loan company.
- What is the method you use for inventory?
- How do you verify your expenses?
These IRS questions are included on Form 4700 Supplement that pertains to businesses.
In order to avoid complications with the Internal Revenue Service be certain that you do the following:
- Profit and income reporting must be accurate. No matter how you may obscure certain income, the Internal Revenue Service has a great ability to locate unreported dollars.
- When completing your business tax return, never use round numbers. Enter the exact figure, even if it is only a penny.
- Double check your records, or have someone else go over them, prior to submitting your return to the Internal Revenue Service.
- Keep confidential the amount of your yearly business income and the amount of business taxes you paid.
- Copy and retain all expense receipts.
- Report only the business expenses that are necessary for the operation of your business.
- Be certain you are using the correct IRS forms to avoid problems with the Internal Revenue Service.