Few things are quite as headache-provoking as the thought of IRS auditors scrutinizing your company’s financial records, one by one.
Of course, you and your finance staff do everything in your power to maintain accurate payment records and tax forms. But it’s a lot for staffers to manage. And despite your best efforts, you never know exactly how an interaction with IRS is going to pan out.
An audit could go swimmingly, leaving your finance staff feeling confident and relieved. Or it could take a turn for the worse… and mean legal trouble and costly fines for your company.
From start to finish
To put those fears to rest and ensure your staff is audit-ready, remember and share these audit tips from tax expert Jim Buttonow:
1. Come prepared. You know how important it is to have records well organized at all times. That fact should be communicated to staffers regularly, so they’re continuously working to keep everything systemized.
It can also be beneficial to conduct a “mock audit.” This first and foremost helps verify that all the information auditors may need is accurate and accessible. But it also gives you a chance to see how your staffers conduct themselves in this type of situation.
Do they flounder, or stay composed? Do they present too much information, or just enough? Working out any kinks before will ensure your company puts its best foot forward for the real deal.
2. Track deadlines. Audits present several time-sensitive steps – when you must respond to the initial request by, when you have to provide files by, and so on.
That’s why you’ll want your staff to create a concise list or calendar. Have them go a step further by setting up computer notifications or reminders a few days before each deadline to stay on track.
3. Get auditor requests in writing. When there’s not a clear structure for running an audit, auditors can get confused. And that can lead to a long and complicated process.
If your department takes initiative and asks the auditor to provide written requests for information, it could prevent a fair deal of confusion and miscommunication. Plus, that written record of how the audit transpired is solid documentation if your company needs to appeal the auditor’s decision.
4. Don’t be afraid to contest. Remember that what the auditor says isn’t necessarily the final word. If your company disagrees with the facts of finding, or how a certain rule is interpreted, you can take your case to the IRS Office of Appeals.
In that event, you’ll need to gather all the proper documentation, and be ready to show your good-faith effort to stay in compliance with IRS. Both will strengthen your case – and could help you avoid fines, penalties or other undesirable consequences.