You probably already know about tax audits. This occurs when the IRS finds a discrepancy in your taxes and decides to take a closer look. It can happen to both individuals and businesses, and it’s enough to make anyone sweat bullets. Business sales tax audits are a little bit different — these occur when the IRS decides to take a closer look specifically at your sales taxes. In a sales tax audit, it’s your responsibility to prove that your business charged the appropriate amount of sales tax on the appropriate items. Here’s a guide to help you take control over the audit process and breathe a little easier.
Start Gathering Your Records
As soon as you’ve been notified of a business sales tax audit, it’s critical that you start gathering your records right away. If there are any records that are missing, you’ll want enough time to contact the appropriate outlets to get copies before the audit takes place. A general list of what you’ll need to get together prior to your audit includes but is not limited to:
- Purchase and sales records
- Purchase and sales invoices
- Your general ledger
- Schedules of depreciation
- Exemption and resale certificates
- Journal entries
- State and federal tax returns going back a few years
- Financial statements going back a few years
- Sales and use tax returns
- Documentation of shipping
Getting all of this together can seem like a daunting task, especially if your business’ information is stored in different places. For example, some records may be stored in off-site warehouses, while other information is stored on discs or flash drives in your office. Other information may be on your accountant’s computer. Give yourself plenty of time to not only gather these records but also assess whether there is any missing information and fill in the gaps.
Do You Have Issues with Your Records?
In some cases, you may have issues with your records that need to be discussed with your auditor. For example, if you’ve had a change in your accounting system halfway through the year, your records might not be consistent and some of the information may have been lost as you switched from one system to another. If you have electronic records, the audit trail may disappear and the auditor may not be able to identify a transaction as taxable and trace if the tax was collected and how much. Destroyed or missing records also need to be discussed with your auditor.
Facing a Business Sales Tax Audit? Get the Help You Need
It’s easy to get completely overwhelmed by the idea of digging up all of your business’ records, looking for holes, filling in missing information, and defending yourself to the tax auditor. You don’t have to do it alone. Tribute Tax Defense understands the unique challenges of a sales tax audit and can not only help you prepare for the audit but can walk you through the process of auditing itself. We can help you prepare your records so you can face your audit confidently. Fill out our online form or call us today at (713) 497-1841 for a free consultation.