Robert J. Fedor, Esq., L.L.C.

Consistency may be key to surviving an IRS inquiry or audit

The weeks leading up to the April 15 tax deadline are often a time in which both individuals and business owners scramble to organize financial information and prepare tax-related documents. For many, in addition to ensuring the tax deadline is met, extra effort is made in an attempt to avoid an IRS audit.

Every year during tax season, tax and financial professionals dole out advice on steps both individuals and small business owners can take to avoid drawing the IRS's attention. While much of the advice provided makes sense and can't hurt to follow, perhaps the best way to avoid having problems with the IRS is to always be prepared in the event an audit does occur.

Advice related to ways to avoid an IRS audit often include filing electronically, keeping accurate financial records, not taking too many charitable deductions and ensuring personal and business expenditures and deductions are separate. For small business owners, following this and other similar advice definitely makes sense. However, if selected for an IRS audit, investigators will likely examine business and tax-related documents dating back several years. It's critical, therefore, that small business owners are able to demonstrate consistency in how financial and tax documents were kept, prepared and filed.

Due to the complex nature of business records and tax codes, most small business owners are guilty of making mistakes. However, an alleged mistake may be deemed questionable by IRS investigators if it is perceived as being inconsistent with a business owner's past records or actions. Consistency, even if flawed, may therefore be a small business owner's best defense when facing an IRS inquiry or audit.

Small business owners who fear an IRS inquiry or audit may result in criminal charges would be wise to contact a criminal defense attorney who handles matters related to tax crimes. An attorney can answer questions as well as provide advice and assistance in the event criminal charges are filed.

Source: INC, "How to Be Honest Enough to Avoid an IRS Audit," Gene Marc, Feb. 26, 2014

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