While no small business is immune from an occasional audit from the Internal Revenue Service, there are some ways to ready your business for a potential review of your financial records. Some experts have argued that the IRS is becoming more focused on the small business owner, due to the increase in the number of small businesses that have risen in the wake of the recession. However, the IRS does give some guidelines online about what an audit means and how to be prepared.
The best course of action as a small business owner is to make sure you are ready for a potential audit by conducting one each year of your own financial records. This can be done by hiring an objective third party auditor, or working closely with a business accountant to review all financial and payroll records, as well as IRS tax forms and reports.
Here are some audit tips for your small business:
- Maintain careful records of all financial transactions generated by your business with an accounting software product that provides reporting features. Run monthly reports and reconcile them against payments received and payments going out.
- Keep all bank records and account statements organized so you can review them at a moment’s notice and these numbers match with your accounting software reports. Correct any errors promptly.
- Handle payroll according to state and federal laws, including any contract workers you employ. Have proper tax forms on file for all who perform work for you.
- File your quarterly and annual business income taxes on time and keep your records together so you don’t miss a payment and have to pay year-end penalties.
If you operate a small business, now is the time to start a system for tracking all monies that come in and go out of your business, including for expenses and equipment purchases. By having all your records in order, an audit will not be as much of a headache.
Talk to the experts at Accent Hiring Group for more information.