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If you’re a small business owner, the idea of an IRS audit might sound scary, but it doesn’t happen often. It’s important to have a good plan in place for such times. Badran Tax has put together this simple guide to help you understand and get through an IRS audit without too much stress.
It’s important to note that IRS audits for small businesses have shown varying trends over the years. According to the U.S. Government Accountability Office, there was a significant decrease in audit rates for individual income tax returns from 2010 to 2019, with an average drop from 0.9% to 0.25%, mainly due to reduced IRS staffing.
Businessdit.com reports that, on average, 642,603 businesses are audited yearly, with small businesses experiencing a higher audit rate of about 2.5%. Notably, in FY 2022, the IRS audited 626,204 tax returns, a slight decrease from the previous year.
Jackson Hewitt’s data indicates that since 2010, the overall number of IRS audits has nearly halved, falling from a rate of 0.93% in 2010 to 0.39% in 2019, with a further dip to 0.2% in 2020 due to the COVID-19 pandemic.
These statistics highlight the dynamic nature of IRS audit frequencies and the importance for small business owners to stay informed and prepared
Step-by-Step Guide to Handling an IRS Audit:
Know Your Rights:
- Find out why you’re being audited and ask for clear explanations.
- Remember, you can always question or disagree with what the IRS says.
Check the Audit Notice:
- Look over the IRS letter to see if the audit is by mail or in person.
- In-person audits can be at an IRS office, your place of business, or BadranTax’s office.
Work with the IRS:
- Give the IRS all the documents they need, like receipts and contracts.
- BadranTax can help get all your papers ready and talk to the IRS for you.
Respond on Time:
- Stick to the deadline in the audit letter.
- If you need more time, ask the auditor directly.
Get Help from Badran Tax:
- Badran Tax is great at solving tax problems and gives each client personal care.
- They can deal with the IRS for you, saving you time and worry.
Keep Good Records:
- Use a good system to prepare your taxes and keep track of your records.
- Use spreadsheets or bookkeeping software to stay organized.
Be Alert for Scams:
- Watch out for fake IRS auditors. Real IRS audit notices only come by mail.
Outsource Your Tax Worries:
Hire professionals like Badran Tax to handle your tax issues and provide you with tax relief.
Going through an IRS audit might not be pleasant, but with the right preparation and help from experts at Badran Tax, you can handle it well.
If you need someone to talk to about tax problems, call Badran Tax at 732-937-9797 and chat with a tax specialist.
Amro Badran, EA is the Managing Partner of BadranTax LLC,
Experienced and Trusted Tax Resolution Firm based in New Brunswick, NJ.
With over 40 years of experience and accreditation as a Federal Enrolled Agent, Amro Badran and his team of experts specialize in helping individuals and businesses resolve complex IRS issues and controversies.
