The Inflation Protection Act has set aside a whopping 45.6 billion dollars to hire a slew of new IRS agents. How will this affect companies and organizations in California? Some believe the most impactful change this legislation will bring is to drastically increase audits.
One grave concern regarding this new law is the level of audit inexperience new IRS agents will have. If you are one of the lucky companies to receive a tax audit, you could spend a pretty penny defending yourself especially if the auditor does not understand how your industry typically functions. The extra time required to compensate an audit team to educate the auditor about the inner financial workings of your business could be quite expensive.
The best thing you could do now to save yourself time and money in a potential audit situation is to assume you will be audited. The way you manage your finances and daily spending activities would need to change so that every expenditure is properly documented at the time of purchase. Keep all receipts and document any out-of-the-ordinary financial transactions. Having good notes will make it easier to get through the IRS audit with fewer questions.
Organization is important
If you are able to present your financial information in an easy-to-understand and organized manner, the IRS agent will be able to better comprehend your company’s activity. Being organized should also boost the agent’s confidence that you maintain good records and follow the tax structure rules for your company.
Learning that you will be audited by the IRS is unnerving no matter how prepared you are. However, by disciplining yourself to document everything and keep organized records, you will likely be able to complete the audit with a favorable outcome.