Many businesses fear the threat of an IRS audit. Getting audited suggests that the business did something wrong or was trying to underreport income on their tax returns. The fact of the matter is, the IRS only audits businesses in Charlotte and elsewhere if the tax return shows abnormalities that throw up a flag or if a computer randomly picks that business for an audit. It’s not necessarily the end of the business, but you don’t want to go at it alone with the IRS because they know the laws inside and out. You need a CPA to help defend your returns and show the IRS that everything is in proper order. Here’s how a Charlotte, NC business accountant protects and defends your business against the IRS.
How a CPA Protects You From an Audit
A CPA has the duty of keeping your financial records organized and above reproach. That includes performing a regular internal audit on the finances to find irregularities and correct them, make sure taxes are paid in a timely manner, and prepare tax returns that comply with the law. In order to do all of this, the CPA undergoes schooling and training to gain the necessary knowledge for preparing financial records and tax returns. What this means for you as a business owner is you’re working with someone who knows things you might not and applies them in such a manner as to be defensible against an IRS audit.
A CPA is your best line of defense against an audit because she prepares your taxes and keeps your books orderly. The IRS will have a hard time finding evidence of wrongdoing when financial paperwork is in proper order and shows no irregularities or mistakes.
What a CPA Does to Defend Your Business in an Audit
Some of things that will trigger an audit is a large increase in income over the previous year, questionable business expenses, math errors, and a random pick by a computer. A CPA will prevent math errors and questionable business expenses from being reported, but an increase in income has to be reported, and there’s no getting around a random pick. No matter what the reason for the audit, you’ll find that your CPA becomes an invaluable defender for your business against the IRS.
The reason is simple: having a licensed professional prepare your financial information and taxes results in paperwork that is organized and easily followed. An increase in income is easily proven as a good year and not money laundering simply through solid financial reporting. A major math error is unlikely because the CPA checks their work multiple times to eliminate the potential of a math error. And in the event of a random pick, the IRS auditors will be able to easily trace all transactions and find nothing to penalize you for.
Perhaps the most valuable service the CPA provides is corresponding with the IRS on your behalf. The IRS makes official communications via letter. It will not make a phone call or email to initiate contact and prefers that most or all official correspondence be done by mail. A CPA can handle the letter correspondence and contact the auditors in question to resolve issues on your behalf so you can do what you do best: run a business.
What if I Don’t Have a CPA?
You may not have had a CPA prepare your tax returns and financial reporting before the IRS audited you, but you can get one after notification. It’s the job of a CPA to organize financial information for their clients, and that includes going through previous months and years to create a clear financial picture. A Charlotte, NC business accountant can help you with an audit after going through your financial documents to determine if you made a mistake or not and defend your actions to the IRS. It’s akin to having a lawyer represent you in court, but in this case, it’s a CPA representing you in front of the IRS.