IRS to conduct 6,000 random business audits
Your friendly Internal Revenue Service auditor might soon be knocking at the door.
The IRS is set to begin reviewing the tax records of 5,000-6,000 randomly chosen businesses this November, according to an update from the National Association for the Self Employed. The audit process is expected to take three years to complete, both for profit and non-profit employers.
The NASE offered suggestions about how to prepare for the possibility:
- Since these audits will be unfolding over a three-year period and audits typically cover a period of three tax (calendar) years, initiating an internal review of employment taxes compliance now is the first step to consider.
- Identify an internal point person to manage the audit preparation process. Notices of audits can simply be addressed to the company at the address used for filing recent tax returns. If not directed to an informed contact person such notices may not be timely or completely responded to.
- Identify and budget for internal and other resources to gather, organize and analyze such records and provide appropriate representation.
- Engage experienced employment tax and audit experts before having an initial audit meeting with the IRS. Legal counsel should generally be able to provide assistance protected by the attorney-client privilege. Whether such expertise is engaged to either visibly represent the employer or simply to advise the employer in the background, it is important to engage these services early. Early involvement usually leads to a more efficient audit process.
- Do not rush into an audit schedule. Do not commit to a date before the adequate resources are in place and there has been an opportunity to gather, review and analyze all initially requested documents. It is important for the employer to have an overview of the company’s strengths and weaknesses.