There are a variety of reasons why the IRS may choose to perform a tax audit on a business. While some audits may be performed as a matter of routine, others may be triggered by discrepancies on tax returns or the claiming of certain types of deductions or business losses. Business owners will want to understand the procedures followed during an audit and the types of documents and information the IRS will consider. By working with a tax law attorney, a business can determine the best ways to meet the IRS’s requirements and avoid or minimize its potential penalties.
Records and Documents the IRS May Request During an Audit
In many cases, audits of businesses will be conducted by mail, although there are some situations where the IRS will choose to perform a field audit in which an agent will visit a business and review information in-person. During an audit, the IRS will review certain types of records to determine whether there are any discrepancies between the business’s finances and what was reported on a tax return. The IRS may ask a business to provide multiple different types of records, including:
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Financial records - The IRS will review a business’s books to address any issues related to earnings, expenses, profits, and losses. Additional documents may also be provided to verify this information, such as bills or receipts for business expenses, purchase records for equipment or materials, or canceled checks for payments made to vendors, suppliers, or contractors.
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