Getting audited by the IRS is enough of a hassle, so the last thing you need is for it to start causing other problems in your business. Not only do you still have to keep customers happy and run payroll, but you’ve now been tasked with tracking down those old receipts from 2024 — and it’s not like the IRS is sending you some extra manpower.
An audit deserves your attention, but it doesn’t deserve all of it.
Don’t let the audit take over your business
The first order of business: give the audit a home. IRS notices, correspondence, requested records, copies of everything you submit, deadlines, and delivery confirmations should all be kept together in one place.
Then put one person in charge of keeping everything organized. That could be you, an employee, your bookkeeper, or someone else you trust. The goal is to keep everything organized, on track, and submitted before the deadline.
Keep a running log of what the IRS requested, what you sent, when you sent it, and what still needs attention. If you mail your documents, keep proof of delivery and copies of everything.
Treat the audit like a project that needs to be managed, not an emergency that hijacks every workday.
Don’t create next year’s tax problem
While you’re trying to keep your composure during an audit, the IRS does not pause your current tax responsibilities. The audacity!
You still have to keep up with your books, file your returns, make tax payments, and report and deposit payroll taxes if you have employees. Sure, you already know your responsibilities, but this is a reminder that you can’t get so buried in the audit that your current tasks start collecting dust.
It sounds silly, but it happens more easily than you think. An audit takes a few hours here, another afternoon there, and suddenly, you’re still trying to figure out the old numbers while creating brand new ones you’ll have to eventually explain, too. One tax problem is enough. No one needs a sequel.
But what happens when managing the audit starts taking more time than running your business? That may be your sign to call in reinforcements.
Find out when handing it off could be the smartest move for your business.
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KNow when to hand it off
Not every audit requires professional help. But you also won’t win a gold medal for handling the entire thing yourself.
All taxpayers have the right to retain an authorized representative when dealing with the IRS, and there are plenty of situations where using one just makes sense. Multiple tax years are involved. You might owe a lot of money. The IRS needs records you can’t find. You don’t know what the IRS is asking you for.
Or maybe the audit is just taking up too much of your time. Digging for documents, deciphering IRS notices, and figuring out what happens next can all pile on hours you potentially can’t sacrifice.
Enter the tax pro. A tax professional can handle many IRS communications and keep the audit moving along while you focus on the thing that actually pays your bills: running your business.
Don’t get blindsided by the outcome
While it may not seem like it now, the audit will be over eventually. An audit can end with no changes, changes that you agree with, or changes that you disagree with.
Now, if additional tax looks possible, it’s a good idea to start thinking about the financial impact before the final bill hits your mailbox. Think about its effect on your cash flow, and how you could adjust your expenses or business decisions in a worst-case scenario. Go ahead and look at IRS payment plans so you know your options. It may seem early, but would you rather owe taxes and have a plan in place, or owe taxes and have no idea how you’re going to pay? We thought so.
Also keep in mind that you don’t automatically have to accept the IRS’s findings. Depending on the situation, you may be able to discuss the issue with a manager or pursue an appeal. That usually means more time and paperwork, which only emphasizes again how important planning can be throughout the audit.
An audit is disruptive, and there’s unfortunately no way around that. But there’s no reason it should stop your business in its tracks. Stay organized, keep the business moving, and get help when time or complications pull you away from actually running your business. The audit should get a piece of your time. It doesn’t need the corner office.
