By August 6, 2021
No one wants to think about the IRS. Who can blame them. Taxes can make you feel like your soul is drying up from the inside out. While that might seem overdramatic, the fact remains that even when you have done your taxes, you will inevitably feel like you are still in danger because you can always be audited.
There is an old saying. The one who fails to plan, plans to fail. If you aren’t prepared to be audited at any time, you will find yourself struggling to figure out what you need to do if it does happen. Here are three of the things you need to have ready for an audit.
Do you have all your receipts?
It may seem a little outdated in our modern digital world, but receipts are extremely important for your taxes. Every transaction you make should be quantified on a receipt. Every expense recorded should also have a receipt, sales slip, paid bill, invoice, deposit slip, or canceled check attached to it. If you don’t have your receipts you can’t claim it on your taxes. If you use a tool like Bill.com for accounts payable and receivable, you can easily access all of this information in the documents section.
When an audit occurs one of the first things they will check is your receipts. They will compare your receipts to your taxes. You need the proof of payment from the receipts to show that you have officially paid, and you aren’t lying. And no, bank statements don’t count as proof of the transaction.
Are your accounts organized properly?
Disorganized accounts are hard to deal with on a normal day. You can’t track your business data efficiently, if at all. Budgeting and planning won’t work properly either. But when it comes to an audit, you can cause extreme problems by not having your accounts organized properly. Softwares like QuickBooks can be extremely helpful in getting your account organized and ready for an audit.
Miscategorized items, items listed two or more times, mistakes in data entry, and other seemingly simple errors raise red flags for an auditor. Not only will it cause your auditor to look at you more closely. It will also prolong your time with the auditor as he sorts through the tangled web that is your bookkeeping.
How confident are you that everything is ready?
The last point is not a technical one. But it relates to the technical issues. If you aren’t confident that your books are up to date, you aren’t ready for an audit. You need to be sure with one-hundred percent confidence that your accounts are organized, that you have all the receipts, and everything is ready to be inspected close up. If you’ve been doing bookkeeping yourself, and you aren’t a professional bookkeeper, how do you know that you’ve been doing it right?
Guessing is gambling. And business owners shouldn’t gamble when their business is on the line.
Getting Your Books in Order
If you aren’t sure you are ready, and you want some help reviewing your accounts, receipts and all, you’re in the right place. Those are the services my team and I specialize in. And we don’t just leave it to you to figure out what confidence feels like. We offer monthly reports in plain, easy to understand language so you know exactly what is going on in your accounts. Give us a call today!