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Anticipating a tax audit

Business owners in Georgia typically understand the importance of maintaining good records so that they can meet their tax responsibilities. Few anticipate being subjected to an audit. However, some business owners have taken advantage of recent changes in tax law to reduce the tax liability of their businesses. As a result, the IRS may be looking more closely at the tax returns filed by these businesses.

Because the IRS can audit any return that is less than three years old, it is essential for business owners to protect themselves against this possibility. This means that companies should keep good records, retain copies of relevant documents and spreadsheets, and work with accountants and other financial personnel to ensure that their processes are in order.

There are audit anticipation strategies that go over and above record-keeping and documenting processes. A business owner should be able to understand the rationale between various deductions and strategies so that he or she is in a better position to show good faith to the IRS.

Another strategy is preemptively identifying personnel within the company who may have knowledge of tax decisions. It may be possible to have an attorney get statements from these individuals if the IRS begins an investigation.

Finally, it is crucial that all interactions with the IRS be taken seriously. This includes so-called informal interviews with an IRS representative. Business owners should prepare carefully and understand that what they say may be used against them at some point.

Business owners and self-employed individuals who are concerned about tax issues may benefit from speaking with an experienced tax attorney. The attorney may be able to review the client's situation and make recommendations for filing taxes correctly and avoiding IRS audits.

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