It seems like taxes are such a bite when we pay them, that it seems downright incomprehensible when a business is faced with an audit. We sputter, “Seriously? We paid you! What more do you want?!”

The sad fact remains, audits happen. According to H & R Block, the IRS levies 4 million penalties every year, and initiates about 1.4 million audits. While we’re all for keeping people employed, maybe they are keeping too many people busy, lol!

What can we do to protect our businesses? Begin with putting into practice the suggestions offered throughout the month. Know which exemptions and deductions your business is eligible to receive, and document them. Keep track of your expenses. If you get tapped for an audit this year, you may feel like you’ve just been sucker-punched, but don’t faint right off the bat.

1.      Discover the source of the problem. Have you been a victim of identity theft? Have you filed on time? Do you owe money you cannot pay? Have you been underreporting? Each of these issues require a different solution. You may research your account to help understand the issue more fully by requesting your tax transcripts from the IRS.

2.      Explore your options. The IRS offers three types of penalty relief: A first time penalty waiver, a statutory exemption and a reasonable cause excuse. This is a whole lot more intense than I find comfortable, so consider hiring a tax professional to represent you. It is money well spent. Someone who knows the ropes can facilitate a speedier resolution.

3.      Be proactive. Most of us procrastinate disagreeable chores. Nothing is more disagreeable than the idea of an audit, and it may feel overwhelming. Instead, be quick to respond, quick to address issues, put your best foot forward. Once you have settled your taxes for the 2021 fiscal year, keep those receipts and forms handy. Be sure you organize the information so it is readily available. Don’t let a question about this year’s taxes burgeon into an audit of your last five years by ignoring requests for information.

4.      Work within the system. The IRS offers tax help when issues arise. If you don’t have an accountant acquainted with your business, find an advocate or contact a tax clinic to find good counsel for your situation. There is an Office of Appeals, which is an independent organization within the IRS who may be able to keep you out of court. Seek the easiest path for resolving the dispute.

Last but not least, you may want to enlist the services of a tax professional. Your accountant is able to take a huge load off your burden by knowing the ins and outs of your spreadsheets, but may not be aware of each and every part of the tax code. Your CPA may specialize in financial planning…not tax issues. When you need a professional, hire the right one for this job. Several possibilities are available through our Chamber: https://business.bluespringschamber.com/list/search?q=tax&c=&sa=False