RecordKeeping and your business

The IRS suggests that every business maintains their files for 3 years. Recently when I sat in on a teleconference it was suggested to keep the files for 5 years as a reference in case the business is audited. Keep current files in a filing cabinet in the business office space. "Old" files can be kepted in banker boxes in a safe location on site. A safe location would be a back room, basement, barn, garage.....just try and make sure it is secure from water damage and/or potetial fire.

The IRS and auditing

The IRS will randomly audit a business. There is nothing to be worried about if the business has accurate records and keeps their financials in order. There are 3 types of audits: 1) correspondence (through the mail); 2) field (at your location); 3) office (at the local IRS office). The IRS will notify you what documentation they are looking for so there won't be any surprises. You will have time to make sure you are well prepared in advance and avoid requesting a postponement. Postponing just drags out the process.

The IRS wants to work with you. If you end up oweing money, the IRS will work with you on paying your taxes. There are payment options so work with the IRS to what you can reasonably pay and stick with the plan.