Getting Ready for a Tax Audit
The 6 Thing’s You’ll Need to Survive a Tax Audit
A tax audit is always stressful, even if you are confident in your accounting. Adequately preparing in advance can bring your stress level down and increase the chance of the audit going smoothly. The more organized and prepared you are, the easier the process will be for yourself and the auditor.
The first step is to get organized. Before your tax audit, make sure you have all the associated records for the tax return in question. The more information you can provide to the IRS to support your position, the better. Be prepared with the following six types of documents:
- Receipts and bank records: The IRS means it when it recommends you save your receipts. Bank and credit card statements are now also accepted as proof of payment, so if you don’t already have them, request them from your financial institution.
- Accounting records: Whether you use QuickBooks or a simple Excel spreadsheet, be prepared to show the tax auditor your books.
- Time-tracking methods: Your electronic calendar, paper date book and any other place you keep track of your time will give the auditor proof of travel dates, meetings and other information they may need to justify certain expenses.
- Vehicle records: If you claim your vehicle as a business expense, make sure you have the receipts from repairs, a mileage log and gas bills.
- Travel and entertainment justification: This particular category gets a lot of scrutiny from the IRS, particularly when it comes to small business accounting. You will need the receipts and other written documentation regarding the purpose of the expenses.
- Property expenses: Whether you rent or own your office, you will have business expenses associated with the space. You may need your lease or a purchase contract, and don’t forget about receipts for large office expenses such as copiers, computers and other equipment.