What You Should Know About IRS Correspondence Audits

Many of these  types of audits occur when
mistakes in accounting happen.

Much ado has been made about the fact that IRS audits are on the  decline, however, this  does not mean the IRS can't, or won't, come knocking on your door.  This is especially true if you own a small to mid sized company, as these types of  audits are actually on the rise. 

Correspondence Audits and What They Mean for Your Business

When it comes to IRS related tax audits, large and small business can face two kinds. One is the face-to-face audit.  This particular process is largely handled in person, with the agent and business owner pouring over relevant documentation to assess how much money, if any, a business may owe in  taxes.

The type of audit small to moderate sized companies most often face however, is the called a correspondence audit. As the name implies, this type of  IRS review is generally handled via  snail mail, and can be disputed in lower tax courts. Even so, if handled incorrectly,  a correspondence audit can lead to a  closer examination  of your company's financial  records, which could lead to significant payouts.

This is something a struggling small enterprise can ill afford.

Dealing with a Correspondence  Audit

Correspondence audits usually occur after an IRS agent is alerted to potential issues on the company's tax return.  It could be something as simple as a clerical  error or  missing finance  documentation.  In such instances, an agent will send out an official letter to the business owner requesting further information for clarification.

Now, a correspondence  audit may appear innocuous enough but don't be fooled.   These types of government examinations can be a drain on time and financial resources as you try to get he matter sorted.  Making matters worse, there is usually very little recourse for businesses who receive these types of  notices in the mail, as contact information is seldom supplied.  In other words, you  receive  the notice with on o way to call  or ask questions regarding the  issue.  The only other option  a company will have at this juncture is to request an in office meeting with your local  IRS representative, but this request may or may not be honored--and that's perfectly legal.

How to Avoid a Correspondence Audit

When you receive one of these little bomb shells in the mail, you will have to respond to it by law or face heavy fines or penalties.  Many individuals try to gather the requested info and send it off hoping that will end the matter.  This may not always be the case.

As the old saying goes, an ounce of prevention is worth a pound of cure. Many of these  types of audits occur when mistakes in accounting happen.  Or worst yet, the company's finance department has lost or failed to keep up with pertinent records.

Avoiding this scenario may be as simple as hiring an outside accounting firm to handle your financial record keeping and tax filing. GBC of Atlanta is familiar with ins and out of Correspondence Auditing and related disputes and can act on your company’s behalf. Contact us today to learn more about how to protect your financial investments and remain in good standing with the IRS.

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Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
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