As a business owner, the last thing you need to land on your doorstep is a tax audit.
Even if you’re absolutely certain that you’ve paid every penny in taxes that the government is due, an audit is time-consuming and stressful — and it eats away at the resources you have to run your company.
The Audit Technique Guides (ATGs) may offer invaluable guidance
The Internal Revenue Service (IRS) publishes its Audit Technique Guides online. These are designed to assist IRS examiners as they perform audits — but business owners can also use them to pinpoint problems in their accounting methods that could trigger an audit in the first place.
The ATGs are industry-specific and cover everything from the aerospace and wine industry to art galleries and veterinary medicine. The ATGs explain:
- Audit techniques that apply to a specific industry
- Unique industry issues and business practices that auditors should consider
- Industry-specific terminology
- Practical procedures and techniques used in accounting and cash management for each industry
- Guidance about personal expenditures and inventory valuation in a given industry
When an IRS auditor examines your company’s books, they’re initially looking for irregularities. They may pay particular attention to how gross income is recorded and what deductions or expenses are listed. They’re also looking to see if your company books support the figures on the company’s tax returns.
The more you know about what to expect from an audit, the easier it will be to manage your expectations and reactions. In any case, you can often resolve tax controversies with a little experienced negotiation.