When you find out the IRS plans to audit your California business, you may feel understandable anxiety and trepidation. When the IRS audits your company, it typically does so because it wants to verify that you reported all income your business earned and took only appropriate business deductions. While having the IRS audit your business may feel daunting, you may be able to navigate the situation better if you know what to expect.
Per H&R Block, while some personal IRS audits occur at random, when the IRS chooses to audit your business, there is usually something amiss within your tax return that triggered the decision.
What happens during a business audit
While most personal tax audits take place via mail, most business audits take place in person and make take up to a year to complete. During the audit, expect the IRS to take a deep dive into your company’s records and accounting history. You may also have to produce additional documentation outlining why you filed your business’s taxes in the manner that you did.
What happens if you disagree with the outcome
If, after the audit, the IRS determines that you must pay more money or otherwise make changes and you disagree with the service’s findings, you have the right to appeal the decision. You must appeal the IRS’s findings within 30 days or you lose your ability to do so. The IRS then sends you a Statutory Notice of Deficiency that you may use to petition the U.S. Tax Court.
Make sure you know what to bring to your IRS audit appointments, too, so that you may prepare accordingly.