Business Tax Preparation & The False Notions About IRS Audits

Tax preparation is an integral part of any business’s overall functioning, and is, in fact a laborious affair. And that make companies to outsource tax preparation specialists. Basically, in order to exploit the expertise of the most skilled professionals in the tax preparation & planning domain, and to gain competitive edge, outsourcing tax experts at affordable prices has become a trend in the last decade.

Common Myths & Misconceptions About IRS Audits

A lot of crap is being believed by the businesses & enterprise owners in the U.S. about IRS audits, which is ofcourse, untrue. We will be discussing about them in detail one by one in the later part of the blog, but at the moment, let’s take a look at some of the hard hitting & true facts about IRS:

Tax Preparation

• Not even 1% of the tax-payers in the U.S. faces an IRS audit per financial year.

• In the financial year 2017, only .5% of all tax returns got examined by the said agency.

Myth#1: A Tax Audit By the IRS Can Destroy Your Business Completely In One Go

It is one of the many false beliefs about the IRS tax audits, and is completely untrue. In most of the cases, you are allowed to put forward your explanations before their team by answering a few questions of them about your business finances & your tax preparation structure & methodology.

Besides, not every correspondence from the IRS is an audit. You just need to be aware about keeping the business invoice receipts & financial records intact with you at all times. That’s it.

Myth#2: Every Single Mistake Made In The Tax-Filing Procedure Attracts An IRS Audit

However, it’s not a thing to cherish about, if you have made a mistake while filing your business tax-returns, but, there is no certainty that you will mandatorily be put to an audit if there has been a mistake occurred on your part in terms of an incorrect tax-return submission to the authorities.

IRS makes use of the DIF System (Discriminate Function) to compare your tax-returns, that includes your income, deductions, credits, & dependents, to the average amount of the same brackets for taxpayers who hold similar incomes, jobs, & household situations.

Myth#3: Professional Tax Preparation Professionals Or Industry Tax Experts Can Save You From An Audit

There is this common misconception ingrained in the minds of business owners all across the world that if they take tax preparation & tax-filing help from the professionals in the domain, then they will surely be exempted from an IRS audit. But, as surprising & painful this might sound to your ears, this is not true at all. When it come sto tax audits, IRS never discriminates basis who filled out your paperwork. Myth#4: All Letters Sent By The IRS Are Audits

Most of us as businessmen think that if there is any letter that has come from the IRS, then that must be regarding a tax audit. However, that is not true. The IRS has three separate forms of correspondence & fact-checking when it comes to your business tax-filings & the tax preparation structure.

IRS adjustment letter: It is one of the simplest form of communication from the tax authorities regarding your tax-filings. Basically, it is all about notifying you that there was an adjustment made because of a simple miscalculation, or a small typographical misconception.

It is just about reviewing the errors & agreeing with the requisite adjustments. All you need to do here is to follow the guidelines & instructions provided in the letter.

Correspondence Audit: It is basically a kind of audit conducted via email. In this, you will receive a letter in the form of an email from the IRS demanding clarifications about the certain sections of your tax return. Once you provide them with the requisite documents stating your expenses & deductions, the audit will be deemed as “satisfied” by the IRS. Examination Audit: An examination audit is a byproduct of the DIF system, ad any irregularity with the DIF attracts an examination audit. In this kind of a tax audit, mostly the audits are handled over the mails & through phone calls, however, there is a possibility of an IRS officer meeting you in the same regard..

Concluding Words

The gist of the whole conversation above, about the IRS audits is that there is a rare possibility of you facing it anytime soon. And, in case of receiving anything in the form of an email or a phone call from the IRS, don’t go in panic mode. Just provide them with the documents they have asked for, and get the audit done without getting freaked out. It is not going to ruin or destroy your world in any manner possible. Keep your tax preparation records & receipts safe with you & get over the fear of an IRS audit. It's not lethal!