If you receive notice of a tax audit, you will want to make sure you have all your papers in order so the process goes as smoothly as possible.
The IRS will look for specific records and documents showing how you came up with the dollar amounts reported on your tax return. Many deductible expenses will not be allowed unless there has been extensive recordkeeping and you are able to prove your eligibility.
When it comes to business deductions, you must submit evidence that the expenses you claimed were ordinary, but not lavish in your field. Each expense must have a specific and valid business purpose you can prove.
You must meet certain requirements when it comes to travel, meals and entertainment. As a business owner, you need to keep an account book, diary, log trip sheet or similar records along with documents like receipts and cancelled checks to substantiate your expenses.
The IRS can audit your company for several years after you have filed your taxes, so it is not only important to keep the documents, but to store them so you can easy recover them if necessary for at least three years. You may want to retain certain documents longer and some you may want to keep permanently.
You may want to retain documents like old tax returns, divorce decrees, adoption papers, retirement plan documents, and real estate papers permanently.
Although maintaining these records can be a pain, it doesn’t have to be. Make it part of your routine and you will easily have all you need should you face an audit.
If you are facing a tax audit, an experienced Tennessee tax attorney can work with you to make sure it goes as smoothly as possibly. Call our office today for your free, initial consultation.