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What you need to know about being audited

Here's what you need to know in case your business is audited.
First of all, you need to know what kind of audits there are so that you can be prepared for the particular audit that is being done on your business.
Types of IRS audits
There are four types of audits that are performed by the IRS.
1.Correspondence Audit
A Correspondence Audit is the simplest and easiest kind of audit that the IRS will do.A Correspondence Audit is simply a letter that you will receive from the IRS Service Center that will require that you send in copies of any canceled checks and/or receipts that are associated with particular deductions that you have claimed on your tax return.Chances are that you won't be audited in this way, because it's reserved for the simplest tax returns.

2.Office Audit
An Office Audit letter will ask you to bring particular letters and documents related to specific items on your return to your local IRS office.If you have a small business, which means that your sales are under $500,000 and you are the sole proprietor, then chances are higher that you will be audited in this way.
3.Field Audit
If you are called in for a Field Audit, then you will be personally called by an IRS agent to tell you that you are being audited.The audit will take place at your business, instead of at the local IRS office.This is how the majority of incorporated businesses and partnerships are audited.
The original phone interview will consist of the following:
? interview with the principals of the company
? scheduling of the auditing date at your business
? questions will be asked as to the location of the records that will be needed
? a list of needed documents and records will be provided
If you are Field Audited, you need to hire professional representation.The IRS agent will be asking you complex and detailed questions about your financial situation.The IRS agent will also be looking at your facility and will look over business operations.
In the case of Field Audits, your professional representative will seek to decrease the amount of exposure that you receive.This means that your representative will be working to protect possible areas of your business that are more vulnerable than others.A representative can work to decrease the amount of information that the IRS agent has access to.
4.TCMP Audit
A TCMP Audit is a Taxpayer Compliance Measurement Program audit.This audit is conducted in order to update data that is compiled for the IRS' auditing scoring program.If you undergo a TCMP Audit, every single aspect of your return will have to be proved through documentation.This is going to take a lot of time, and a lot of work.In other audits, you will only have to prove certain items on your tax deduction.With a TCMP Audit, every single line of your tax return will be examined.
You will want to consider hiring a professional representative for this type of audit also.
Tips for how to respond to an audit
The first thing that you need to do when you find out that you are going to be audited is to respond to the IRS as quickly as possible.The sooner you respond, the more responsible you appear to be and the less time the auditor will probably spend looking at your records.
When you go in for your interview, you can either have a representative attend the interview with you, or you can handle the interview on your own.If you choose to fly solo, you should be very careful about every single question that is asked and every statement that you make.Everything that you say will be analyzed by the auditor, so don't be flippant or lax.Only give information that is absolutely needed.

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