Understanding IRS Audits and How to Prepare for Them
Understanding IRS Audits and How to Prepare for Them Few words strike more anxiety into business owners than “IRS audit.” The idea of someone combing through your financial records can feel intimidating, even if you’ve done everything by the book. But the truth is, audits aren’t always as dramatic as they seem. They’re simply a process the IRS uses to verify that the information on your tax return is accurate. The key isn’t to live in fear of an audit, but to understand why they happen, how they work, and—most importantly—how to prepare so you can navigate them confidently. By the end of this guide, you’ll know how to position yourself for smoother outcomes and avoid unnecessary headaches. Why IRS Audits Happen Contrary to popular belief, audits aren’t random punishments handed out at will. They usually stem from: Unusual discrepancies: Numbers that don’t add up between your reported income and the IRS’s data. Large deductions or credits: While perfectly legitimate, sign...