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HOW TO BE AUDIT-PROOF

If you're in business, you have around a 1 in 100 chance of being audited by

the IRS. If you run a business from home, your chances go up about four

times. As long as you keep your books in good order, though, an audit is

nothing to be scared of. The IRS won't audit you just to harass you. They

just want justification of certain items on your tax return. There are two

important things to do if you get audited, though, that can protect you and

your business from undue problems.

When the IRS notifies you that you will be audited, they will give you the

choice of having the audit meeting at the IRS office, or your office. ALWAYS

HAVE THE AUDIT TAKE PLACE AT THE IRS OFFICE! Many business people think that

they should have the audit in their own office, so they feel more

comfortable. This is the WRONG thing to do. If you let the IRS agent into

your office, you have given him or her the opportunity to view your whole

operation. They will definitely be looking for other things to question you

about, besides the original audit item. If you have the meeting at the IRS

office, it forces the agent to focus on the original item.

The second thing you should do goes along with the first. When you go to

the IRS office, THE ONLY PAPERS YOU SHOULD TAKE WITH YOU ARE ONES DIRECTLY CONNECTED TO THE POINT OF CONTENTION!

If the IRS has a problem with a certain deduction, say travel expenses, take the receipts that will back up the deduction, AND NO MORE!

If you take your complete set of business

records, the agent is sure to take some time "looking for backup information"

for your deduction. In reality, they will be looking for other, unrelated

items that don't "look right." If you have the meeting in your office, they

have every right to look through your files for the same things.

In other words, the smart thing to do is only give the IRS access to

information regarding the items they are auditing you for. They will let

you know the reason for the audit beforehand. This gives you the knowledge

you need to protect yourself and your business from audit nightmares.