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The possible effects of an audit on a small business

More often than not, experiences with the federal government’s tax collecting arm are not pleasant; either because the IRS believes that a small business owner is cheating Uncle Sam out of money, or business owners feel as if they are unfairly singled out because of their success.

Either way, the effect of an audit is fairly straightforward. If a business is audited and ordered to pay back taxes, chances are that the business will report more income in the years after the audit. Similarly, if an audited business wins its battle against the IRS, chances are that it will report less income in the years to come. 

These findings come as a result of a study conducted by an economist from Middle Tennessee State University and highlights a growing trend among small business owners and individual taxpayers alike. The difference in tax payments can hamper or help the fortunes of a small business. This is why having the advice and guidance of an experienced tax attorney can be essential.

A skilled lawyer can help business owners understand what expenses can be tax deductible, how equipment and materials can be depreciated, and how some income can be deferred to later years if necessary to balance tax payments for a current year. Most importantly, a tax attorney can hold the IRS accountable for calculations that lead to improper tax assessments.

If you have questions about audits or have received a letter demanding inspection of records, an experienced tax attorney can help.

The preceding is not legal advice. 

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