A bookkeeper can be a lifesaver to a business owner. Bookkeepers can do everything from Accounts Payable (tracking money going out) to Accounts Receivable (money coming in) to Payroll to Quarterly Tax Returns to keeping everything organized for the Accountant which saves the Accountant time (and you money) to helping apply for business loans to making bank deposits and reconciling the bank account monthly.
Bookkeeping is time consuming and having a bookkeeper you can trust (and like) can enable a business owner to devout their valuable time elsewhere in the business.
Wouldn't it be nice being at a networking event knowing that the business finances are being taken care of?
Monday, April 20, 2009
The Audit Explained
Internal Revenue Service Audits and You
By: Gina D’Orazio
The word “audit” is a very scary word to people. How could the whole concept of an audit not be scary? We conjure up an image of having to provide a substantial sum of money to the government that we just do not possess. Even in the most perfect economic times coming up with money to hand over is a daunting task. Though you will never see me volunteer to go through one, the reality is that we do not need to be afraid of audits.
There are three (3) different types of I.R.S. audits information to the I.R.S. office.
They are as follows:
1. Correspondence – the taxpayer receives a letter in the mail requesting information and the taxpayer has the opportunity to mail back their response/documentation by a designated date.
2. Office – the taxpayer receives a letter in the mail stating that an audit is scheduled to occur and provides the date, time, location of local I.R.S. office, and what documentation to bring to the audit. On the day, the taxpayer arrives promptly with the designated information. The audit occurs at the local office of the I.R.S. by an I.R.S. agent.
3. Field – the taxpayer receives a letter in the mail stating that an audit is scheduled to occur at the location of the taxpayer on a designated dated, time, and outlines the information the I.R.S. will review at the time of the audit.
An important fact to remember is that a taxpayer may request in writing to have the type of audit switched to a different type. The taxpayer may write to the I.R.S. promptly after receiving initial notification of the audit and request the switch and the reason for the request for switching the type of audit. A reason for the switch may be as simple as the taxpayer may rather have the audit performed on their turf versus bringing several boxes of information to the I.R.S. Office.
Rescheduling the date and/or time of an audit is available but frowned upon by the I.R.S. The Rescheduled audits can be costly for the I.R.S. However, the I.R.S. will reschedule audits if (1) the taxpayer has their information scattered in several locations and needs additional time to organize and put their documentation together or (2) a medical emergency erupts last minute that the taxpayer had no way to plan for.
What happens if a taxpayer does not have all their documentation ready at the time of the audit and does not want to reschedule the audit?
If a taxpayer does not have all their documentation together in time for the audit then the taxpayer may proceed with the audit and provide what they do have at the time of the audit. The taxpayer may request to schedule a follow up exam and provide the remaining documentation at that time. The auditor can limit or expand the scope of the audit based on the initial meeting (i.e. the taxpayer may clarify a question and the auditor does not further investigate the documentation). If the taxpayer files an amended tax return at the time an audit is scheduled then the taxpayer may present that amended return for review and possible cancellation of the audit and an immediate audit report.
The I.R.S. prefers to complete audits at the field and office examinations. The I.R.S. permits a taxpayer representative (i.e. tax preparer) to be present at the audit. There are representatives who prefer to attend the audits without the taxpayer due to concern the taxpayer may “lend” to much information to the I.R.S. The I.R.S. will conduct their audits of a particular taxpayer until the taxpayer has a clean tax return (i.e. there are no red flags in the return).
So what happens when a taxpayer owes the I.R.S. money and knows that he or she will have trouble paying? The I.R.S. fully acknowledges the tough times the country is facing. The I.R.S. is providing flexibility on collecting the money that is legitimately owed to them. So what does this mean? This means that the auditor has the flexibility to devise a payment plan for the taxpayer that meets his or her budget. Interest will accrue, so it is in the best interest of the taxpayer to pay it back as soon as possible. If the auditor reviews all the information and realizes that paying any money would be a severe hardship for the taxpayer then that is taken into consideration by the auditor and I.R.S.
So what helps an audit to proceed smoothly?
1. good quality documentation (i.e. keep your receipts, bank statements, invoices).
2. documentation that is in a logical order (i.e. figure out a good filing system and stick with it).
Remember, audits are costly for the I.R.S. so they want to complete the audit as quickly as possible. So the fewer delays the better. Once the audit is complete, the I.R.S. will provide an audit report with their findings, adjustment/recommendations and what is financially due (if applicable). Taxpayers have the right to ask questions in response to the audit report. If a taxpayer receives their audit report and they have questions then feel free to speak with the auditor and/or manager for thorough answers. If an adjustment/recommendation seems incorrect on the report then the taxpayer should feel free to question it or file for an appeal. Time is of the essence in this matter so a taxpayer will not want to wait to question an item in the report. The sooner questions or concerns are resolved the better for the taxpayer and I.R.S.
The long and short is that despite perceptions the I.R.S. really does want to work with taxpayers because at the end of the day the I.R.S. wants their money and taxpayers want to live a peaceful life.
By: Gina D’Orazio
The word “audit” is a very scary word to people. How could the whole concept of an audit not be scary? We conjure up an image of having to provide a substantial sum of money to the government that we just do not possess. Even in the most perfect economic times coming up with money to hand over is a daunting task. Though you will never see me volunteer to go through one, the reality is that we do not need to be afraid of audits.
There are three (3) different types of I.R.S. audits information to the I.R.S. office.
They are as follows:
1. Correspondence – the taxpayer receives a letter in the mail requesting information and the taxpayer has the opportunity to mail back their response/documentation by a designated date.
2. Office – the taxpayer receives a letter in the mail stating that an audit is scheduled to occur and provides the date, time, location of local I.R.S. office, and what documentation to bring to the audit. On the day, the taxpayer arrives promptly with the designated information. The audit occurs at the local office of the I.R.S. by an I.R.S. agent.
3. Field – the taxpayer receives a letter in the mail stating that an audit is scheduled to occur at the location of the taxpayer on a designated dated, time, and outlines the information the I.R.S. will review at the time of the audit.
An important fact to remember is that a taxpayer may request in writing to have the type of audit switched to a different type. The taxpayer may write to the I.R.S. promptly after receiving initial notification of the audit and request the switch and the reason for the request for switching the type of audit. A reason for the switch may be as simple as the taxpayer may rather have the audit performed on their turf versus bringing several boxes of information to the I.R.S. Office.
Rescheduling the date and/or time of an audit is available but frowned upon by the I.R.S. The Rescheduled audits can be costly for the I.R.S. However, the I.R.S. will reschedule audits if (1) the taxpayer has their information scattered in several locations and needs additional time to organize and put their documentation together or (2) a medical emergency erupts last minute that the taxpayer had no way to plan for.
What happens if a taxpayer does not have all their documentation ready at the time of the audit and does not want to reschedule the audit?
If a taxpayer does not have all their documentation together in time for the audit then the taxpayer may proceed with the audit and provide what they do have at the time of the audit. The taxpayer may request to schedule a follow up exam and provide the remaining documentation at that time. The auditor can limit or expand the scope of the audit based on the initial meeting (i.e. the taxpayer may clarify a question and the auditor does not further investigate the documentation). If the taxpayer files an amended tax return at the time an audit is scheduled then the taxpayer may present that amended return for review and possible cancellation of the audit and an immediate audit report.
The I.R.S. prefers to complete audits at the field and office examinations. The I.R.S. permits a taxpayer representative (i.e. tax preparer) to be present at the audit. There are representatives who prefer to attend the audits without the taxpayer due to concern the taxpayer may “lend” to much information to the I.R.S. The I.R.S. will conduct their audits of a particular taxpayer until the taxpayer has a clean tax return (i.e. there are no red flags in the return).
So what happens when a taxpayer owes the I.R.S. money and knows that he or she will have trouble paying? The I.R.S. fully acknowledges the tough times the country is facing. The I.R.S. is providing flexibility on collecting the money that is legitimately owed to them. So what does this mean? This means that the auditor has the flexibility to devise a payment plan for the taxpayer that meets his or her budget. Interest will accrue, so it is in the best interest of the taxpayer to pay it back as soon as possible. If the auditor reviews all the information and realizes that paying any money would be a severe hardship for the taxpayer then that is taken into consideration by the auditor and I.R.S.
So what helps an audit to proceed smoothly?
1. good quality documentation (i.e. keep your receipts, bank statements, invoices).
2. documentation that is in a logical order (i.e. figure out a good filing system and stick with it).
Remember, audits are costly for the I.R.S. so they want to complete the audit as quickly as possible. So the fewer delays the better. Once the audit is complete, the I.R.S. will provide an audit report with their findings, adjustment/recommendations and what is financially due (if applicable). Taxpayers have the right to ask questions in response to the audit report. If a taxpayer receives their audit report and they have questions then feel free to speak with the auditor and/or manager for thorough answers. If an adjustment/recommendation seems incorrect on the report then the taxpayer should feel free to question it or file for an appeal. Time is of the essence in this matter so a taxpayer will not want to wait to question an item in the report. The sooner questions or concerns are resolved the better for the taxpayer and I.R.S.
The long and short is that despite perceptions the I.R.S. really does want to work with taxpayers because at the end of the day the I.R.S. wants their money and taxpayers want to live a peaceful life.
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