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Can an Accountant Help With Small Business Tax Audits?

Mar 20, 2022 8:23:20 PM / by CSI Accounting Staff posted in small business taxes, small business accounting

What’s one of a small business owner’s worst fears? Besides your business needing to shut its doors or not turning enough of a profit, it could be the possibility of your business going through an audit.

Growing your network with other business owners is an important part of the operation of any small business. However, when you pool common walks of life together, you start to share the same fears. And the fear of an audit can grow even more rapidly if someone in your ever-growing network goes through one.

Audits are stressful and time-consuming. Small business owners who we’ve talked to over the past several decades have voiced their concerns with the possibility of an audit, as well as how it could hurt their efficiency. Maybe they’re even worried that they could say the wrong things to an auditor or accidentally give incorrect information.

That normally leads to the question, “Can an accountant help me if I ever get audited?” The short answer is yes. In this article, we’ll discuss how accounting firms like CSI can help you with your small business audit and answer in detail:

  • What a tax audit is
  • What causes a tax audit
  • What CSI does to help in the case of a tax audit

Auditor looking into Small Business Tax forms with magnifying glass

What is a Tax Audit?

A tax audit is the government’s way of verifying income and expenses for a business. There are two types of tax audits: sales tax audits and income tax audits. Sales tax audits are related to filing and paying a sales and use tax, which is done by the State. Income tax audits are related to your tax returns. Sales tax audits are much more common than income tax audits. 

Sometimes an audit can come in the form of a CP2000 letter in the mail. This happens when the government will be able to verify some information from third parties. The letter will ask you to verify some information and respond back in a letter as well. 

However, businesses tend to have in-person visits since your business’s information can’t be verified by third-party sources like your personal information can. An auditor will physically go through your records to obtain your information themself.

What Causes a Tax Audit?

Sales Tax Audits

Sales tax audits can be completely random, and most are! Unless you’re not paying your sales tax or are doing something completely wrong, you’re not likely to trigger an audit. 

It’s much more probable that you will be chosen at random because the State has a goal of auditing every business in the state every three years for sales tax. Remember, sales tax audits are relatively common.

Income Tax Audits

There are two reasons why an income tax audit will usually occur. You can still be chosen at random for an audit, even if you’re confident that your books are correct. The second reason is that there is mismatched information between the numbers on your return and the numbers from third party sources. Typically, this is in the form of underreporting income. If this happens, an audit is pretty much guaranteed.

Here’s a fact that should help you breathe easier; income tax audits are rare. Plus, with a trusted expert at CSI Accounting & Payroll on your side, an income tax audit won’t fall on your shoulders.

Read the complete guide to Small Business Taxes For Beginners

What Does CSI Do to Help With a Tax Audit?

We can help you with an audit! Audit representation is included in your monthly accounting fee. The only time that we would charge for audit representation is if the audit is for a time period during which you were not our client.

CSI offers agent-level support, meaning that we deal with the IRS agent directly in the case of income tax audits. We will get power of attorney so we can work through the appeal process if we feel that they incorrectly made a determination. Almost all of these issues are resolved at the agent level and never need to go to tax court. If we’re preparing your monthly sales tax returns, we will also represent you in a sales tax audit. 

We are willing to consider new clients who are going through an audit as they come on board with us. It’s not necessarily indicative of illegal activity; it could just be a symptom of a business’ accounting errors that is looking for a better accounting solution. Since this would not be a result of work that we performed for them, we would help them for an additional fee. Here, we need to perform back work in both cases of an income tax audit and a sales tax audit. Back work, or back taxes, are an additional charge.

Read more about additional services that are offered for additional fees here.

Stop Worrying About a Lack of Tax Audit Support

Audits are taxing (Get it?), and the thought of handling them by yourself can be overwhelming. Having an understanding of what tax audits are and what can cause them is just the tip of the iceberg. 

Now that you also know that CSI Accounting & Payroll offers agent-level support to help you through an income tax audit, which is where most audits are resolved, you should feel the confidence you need to reach out and have our first conversation. Click the button below to schedule a free consultation!

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Not convinced yet? You can also take time to read about if you are a good fit to work with CSI.

CSI Accounting Staff

Written by CSI Accounting Staff

This article was composed by a member of our staff who interviewed our experts to get the facts straight. Any uncited information found here came straight from a knowledgeable accountant or payroll specialist.

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