How to prepare for an IRS audit

Due to the recent tax reform legislation, companies in Maryland and throughout the country could face a greater IRS audit risk. Some businesses will have had a greater incentive to accelerate deductions in 2017 and defer income to 2018. This could be seen by the IRS as irregular activity. Furthermore, many companies have changed their accounting methods or altered their tax years in anticipation of a lower corporate tax rate and repatriation of earnings.

An effective way to prepare for an audit is to assume that one will occur. This allows an organization to develop the legal and factual basis for any information that it includes with a return. Taking time to analyze all documents that go along with a tax return can help a business develop a coherent narrative that is supported by facts. Ultimately, this will make it possible to present a strong case to the IRS regarding any tax position a company decides to take.

It is worth noting that the IRS can reach out to former employees and other parties. This makes having a consistent story even more important. In some cases, seeking legal advice prior to or during an audit is a worthwhile endeavor. Doing so can help companies determine if they need to hold onto documents or other information that is relevant to a case.

If a taxpayer receives an audit notice, it doesn't necessarily mean that they did something wrong. However, those who are going through the audit process will likely need to be ready to defend their positions with as much information as possible. A tax attorney could help a client develop a defense.

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