Tax Tips - Passing a tax audit with speed!

Organization is paramount to success.

The rule is “quality” over “quantity”. Make sure any reports are flushed out with details, in proper order or sequence and labeled. If you use a program like Zoho Books, make sure all reports are from Zoho Books and not hasty recreations from Excel or another program. If one year doesn’t match a previous year, you are better off inputting the information in again to ensure that all the reports are the same format. Believe it or not, presentation makes a difference as it will make your business appear professional, organized and on top of tax issues.

Organize your information in the chronological order in which it is requested and use folders or any dividers to keep it organized. Highly organized information will not only speed up the audit, but also reinforces the perception that you have little to hide.

Know your numbers and the information provided.

If it takes too much time to answer any questions, be assured that further details will be requested and your audit will proceed at a snail’s pace. Your reports and professional organization can be rendered useless if you can’t answer the simplest of questions.

Start by knowing “what” each report is and then proceed to understanding the details. Have answers to questions such as: Why were sales so inconsistent or why payroll fluctuated year to year?

Auditors are looking for inconsistencies and illogical spikes because they are most likely to lead to more revenue generation over simple accounting mistakes.

If your numbers do not match, know why.

Mistakes happen and many companies are caught underpaying taxes, so don’t feel like a criminal, unless you have reason to, of course. Any error that you catch and bring up to an auditor, will lead to less scrutiny. If you can explain the justifiable error and bring it up beforehand, the taxing agency can often help ease the burden for any penalties. In any case, understand an audit is to generate revenue and not to throw people in jail.

There is no need to be nervous, stressed or feel like the world is crumbling under your feet. Audits happen and more often than not are passed without incident. Follow these basic steps and you can sleep easier at night.