Would a Tax Accountant Be Able to Help with IRS Audits?

Tax accountability and IRS audits play critical roles in ensuring accurate tax compliance. Understanding the roles of tax accountants and what they do to help firms during audits is essential for business owners and individuals alike. This article will explore how tax accountants can assist in IRS audits and the implications of failing to maintain proper records.

Understanding Tax Accountants and IRS Audits

A tax accountant is a professional who specializes in tax preparation, planning, and compliance. They help clients manage their financial records, prepare tax returns, and navigate complex tax regulations. In the context of an IRS audit, a tax accountant plays a crucial role by ensuring all necessary documents and records are in order. A tax accountant collates information to determine the payable amount of tax, which is typically calculated from the profit and loss account reflected in the balance sheet. For instance, if a firm has a net income, it will pay income tax; otherwise, no tax is due.

The Importance of Proper Records

To conduct an audit, an authorized auditor requires specific documents and records. These include purchasing and selling transactions, records of movable and immovable property, inventory stock registers, cash book, and more. These records are essential for the auditor to verify the accuracy of the tax return. Without these documents, an audit cannot proceed effectively.

Businesses often prefer to engage with Certified Public Accountants (CPAs) for their audit needs. CPAs possess the necessary expertise and knowledge to ensure that all documents are correctly prepared and presented. However, it is important to note that even those with a commerce background but without specific authorization are not permitted to perform such audits. The audit process, while complex, does not require advanced technical knowledge to understand and execute properly.

Can a Tax Accountant Help?

The answer is yes, a tax accountant can indeed help during an IRS audit. They can assist in gathering and presenting all necessary documentation to support the entries in the tax return. During the audit process, the tax accountant will:

Prepare for the audit by organizing records and documents Respond to the auditor's inquiries and provide additional documentation as required Work to justify any entries on the tax return substantively Advise on any potential tax adjustments based on the audit findings

However, it is crucial to understand that while a tax accountant can help, there is a cost associated with this service. Clients may be charged an hourly rate, which can quickly add up due to the extensive preparation and time required for the audit process. Additionally, if the records do not support the return entries, the client will still have to pay for the accountant's time and any tax adjustments.

Another option available is a tax preparation company that offers audit assistance for a significantly lower fee of 40 dollars. This lower cost can save a considerable amount of money in audit preparation. Proper record-keeping is key to surviving an audit, as it forms the basis for any defense against tax grievances.

Preparation for Audits in the Coming Year

It is reported that audits will experience a resurgence this year due to an increase in IRS manpower. Random audits will return, and small businesses with numerous expenses will face a higher likelihood of being audited. To prepare for these audits, it is advisable to consult with a tax advisor for guidance on audit support and the importance of maintaining proper records.

In conclusion, a tax accountant can play a vital role in helping with IRS audits by ensuring all necessary documents are in order and providing support during the audit process. Maintaining proper records is crucial to mitigating the risks associated with audits and ensuring compliance with tax regulations.