These two phrases can strike concern within the hearts of your tax and accounting purchasers: IRS audit.

Understanding the right way to handle shopper expectations and issues and the right way to get by means of the method is a vital talent within the tax and accounting professions. That’s true for each giant accounting companies and small accounting companies, since any shopper may very well be the goal of an audit. These steps will assist when purchasers come below IRS scrutiny.

6 causes your shopper’s tax returns may very well be flagged for an IRS audit

The Inner Income Service carries out tax legal guidelines created by Congress. That features assessing taxes, amassing taxes, and imposing tax legal guidelines with audits and prison investigations when needed.

Most IRS audits will not be random, though that’s attainable. Somewhat, a return is flagged for audit primarily based on a number of components. Somebody is at increased threat of audit in the event that they:

1. Have revenue over US$5 million a 12 months
2. Personal a enterprise that accepts plenty of money (similar to salons and laundromats)
3. Have apparent errors on their return
4. File a Schedule C for a sole proprietorship
5. File tax returns exhibiting they misplaced cash a number of years in a row
6. Have giant revenue swings from 12 months to 12 months

7 steps to take when your tax and accounting shopper is audited

When purchasers obtain a letter from the IRS about an upcoming audit, you may information them by means of the method with these steps:

1. Provide illustration and help to handle feelings and fears whereas being audited

Tax legal guidelines are complicated, even for professionals who work with them day by day. Getting a letter from the IRS about an audit may be horrifying. Nonetheless, having illustration from a tax and accounting skilled can alleviate a few of these fears.

2. Clarify the IRS audit course of intimately

Most individuals have by no means been by means of an IRS audit. Tax and accounting companies can assist purchasers really feel extra in charge of the scenario by explaining:

• What is predicted of them through the audit
• What paperwork the IRS is prone to request
• How lengthy the audit may take
• Different logistics needed for the IRS to finish the audit, similar to the place they are going to work and whom they need to converse to for questions

Set expectations early on and put together the shopper for the potential for getting a invoice for added taxes and attainable penalties ought to the IRS uncover an error.

3. Set expectations for communication through the audit

Some purchasers need to know each element, whereas others simply desire a abstract throughout key levels of the audit. Learn how and after they want to talk in regards to the course of. Additionally, benefit from audit know-how and new on-line audit instruments to make your complete course of extra environment friendly.

4. Assist purchasers perceive their rights through the audit course of

Audits take time, so be sure you replace your tax and accounting purchasers about what’s going on and the right way to deal with letters or requests from the IRS. For instance, a shopper with a certified consultant can’t be compelled to attend an in-person interview with the IRS with out a summons. Moreover, many IRS auditors will ask if they will work on the taxpayer’s residence or enterprise, however as a consultant, you may supply your workplace as a substitute.

5. Help in compiling and submitting tax data

Offering organized and full tax and monetary data strikes the method ahead easily. Assist purchasers set up all the knowledge requested by the IRS, in addition to extra info you suppose they may request sooner or later. Then submit the entire supplies by means of your workplace.

6. Request extra time to handle the audit course of, if wanted

The IRS will set particular deadlines. Your shopper can also need to transfer by means of the method rapidly. Nonetheless, for those who want extra time to gather info and set up their documentation, then make sure that to request extra time.

7. Clarify the right way to attraction findings they imagine are incorrect

When the IRS points its ultimate report, your tax or accounting purchasers might disagree with a number of the findings. Clarify how they will file an attraction with the IRS, together with the deadlines to file an attraction and what they will count on in that course of.

The tax auditing course of is altering quickly as new know-how in auditing and legal guidelines evolve. Uncover extra ideas for serving to purchasers by means of an IRS audit at Thomson Reuters.