Does Audit Protection Matter?
Before figuring out if audit protection matters, just what is it? If you search on “tax audit protection” in Google, you will see hundreds of .com sites offering it as a service, and your tax preparer probably does as well. It can be included in their services or added for an extra fee.
If you do the same search with “.gov tax audit protection,” you probably will not see any .gov pages in the top search results anywhere. So, you can safely assume that the IRS does not talk much about services that offer some or both of:
Professional assistance with preparation for an audit.
Legal and/or tax professional to work with you or on your behalf with the IRS during an audit.
The IRS does have a lot to say on their website about their procedures in an audit, such as requirements for you, documents they may require, and where and how they can conduct the audit. Basically, you are, from the moment you receive notice that you are “selected” for an audit, more of a “target” than a “selection.”
The IRS.gov website has thousands of pages of tax regulations, procedures, and audit information. To give you an idea of how an audit may impact your life, both business and personal, here are a few things for the site that show the complexities and how you may be required to respond.
Legal papers (with four sub-categories)
Loan agreements (with nine sub-items)
Logs or diaries
Medical and dental records (with five sub-items)
Theft or loss documents (five sub-items)
There is a section of the site that has different industries and business activities and the special audit procedures and requirements for each. An example would be the seemingly single-incident and not that complicated situation of a foreclosure and the forgiveness of the debt. There is a question of tax liability on the amount of debt forgiven and whether it should be declared as income on the tax return.
The document is a .pdf on the site. It contains 70 pages and 31,000+ words. If the IRS can take a single incident of a foreclosure and whether the forgiven debt is taxable or not and need 31,000 words to explain how they’ll handle auditing the taxpayer, think of what they could require of you for your business.
All of this is to give you a snapshot of the hassles you will endure and the time, effort, and maybe money that will be involved in an audit. The question of this article is whether audit protection matters. It is a personal decision, though it could be a business decision as well if you have partners or shareholders.
However, if you are the ultimate “go-to” person for tax issues in the business, then it is you who may be sitting in front of a bureaucrat with nothing else on their plate than taking every minutia of your return and spending however long it takes to figure out if you did things right or if you owe taxes, penalties, and interest.
If you can sit there with a professional at your side, especially one who had a hand in preparing your return, you will probably feel a lot better and maybe for a much shorter and less painful period of time.
With Tax Hive’s years of experience in tax and business services, we use our expertise to make your life easier so you can focus on building your business. Ever changing rules require a team who knows you, your business and the tax implications. Our tax professionals meet your needs while helping you manage tax risk, control costs and reap maximum benefit. If you’re ready to get started, CLICK HERE to see if you qualify for a FREE strategy session with one of our specialists today.