Tax Preparation Near Me: Business Audit Preparation
Tax Preparation Near Me
Tax Preparation Near Me: Preparing for audits can seem a daunting task at first. Getting financial statements and tax returns in order is only a small part of the equation.
Planning and choosing a proactive approach can help your business to prepare well for any kind of audit.
Let us discuss how you can do the audit preparations for your business.
Types of Audits
A business can go through different types of audits. These audits can be regular or special-purpose. Broadly, we can categorize the types of audits into three main categories.
These audits are for internal use mostly. Businesses conduct these audits to verify the correctness and completeness of their financial records mainly.
Internal audits can be performed by company employees or third-party professional auditors.
An external audit provides a fair opinion about the financial statements of a business. These audits are required by regulatory bodies for all companies.
External audits can only be performed by qualified auditors.
Government regulatory audits, more commonly known as IRS audits are not mandatory for all businesses. The IRS chooses some businesses or individuals for auditing based on certain indicators and indicators to verify the financial records. For this reason, tax preparation near me services are essential.
How to Prepare for an Audit?
The external audit is a statutory requirement. Many businesses chose to conduct an internal audit as well. An IRS audit is mostly performed when a business fails to submit proper tax returns.
In either case, businesses can plan ahead and prepare for an audit with these useful tips.
Planning for an Audit
You can set aside financial resources and align your activities to prepare for an audit ahead of time. It will ease the pressure if you face an unwanted audit call such as in the case of an IRS audit.
The planning phase also includes identifying human resources and skills for audit preparations. Be prepared with professional tax preparation near me services.
Organize Data and Important Documents
The key to audit preparations is the organized financial data of a business. If you keep accounting and bookkeeping records in order, your audits will be smoother.
Accounting records turn raw data into financial statement line items. Also, it is important to organize key financial documents such as bills, invoices, receipts, purchase orders, and so on.
Review Previous Audit Reports
An effective way of preparing for audits is to review previous audit reports. Like tax filing, you can begin with the previous audit reports.
You can also talk to your financial advisor or auditing service provider for help at this stage.
Delegate Roles and Responsibilities
Even if you run a small business, you cannot assign all accounting and auditing tasks to one person. It is important to delegate roles and responsibilities clearly.
Assigning roles to capable persons means you’ll organize financial data properly. That in turn will lead to proper tax filing and accurate financial statements.
Talk to a Professional
Audit preparations can get daunting for many businesses in the absence of an auditor’s expertise. One way to fulfill the gap is to outsource the task to a professional and qualified person.
Seeking help from a professional with experience and prerequisite skills can ease the pressure from you. It will save you time and money, importantly, it will help you stay compliant.
Key Points to Remember
Since most businesses prepare and focus on IRS audits, we’ll mention a few key points to remember.
For IRS auditing purposes, you may need to keep the accounting and financial records for at least three to six years. In the broader legal context, you may need to keep your tax filing and return records forever.
Thus, it is significantly important to maintain accurate financial and accounting records backed by evidence. Organize your invoices, expenses, revenue receipts, and bills properly.
Avoid Underreporting Income with Tax Preparation Near Me Services
If you run a small cash business, it is often tempting to underreport income. This practice cannot save you taxes for long.
Further, underreporting income means you’ll always be covering up on the expense side as well. Thus, your chances of an IRS audit increase with such practice.
Do not overstate Losses
A very similar tactic to that of understating income is to overstate losses. Again, this practice cannot save you taxes in the long run.
You’ll need to back your loss claims with evidence. Any false claim can get you an IRS audit call as well as tax penalties.
Be Cautious with Deductions, Credits, and Donations | Tax Preparation Near Me
Finally, it is wise to stay cautious with tax deductions and credits. You should take full advantage of allowed tax deductions and credits. Just make sure to apply for qualified deductions/credits.
Similarly, pay attention to donations and do not overstate them. You may need qualified appraisals for large donations as well.
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