If you get a notice of an IRS audit, it’s crucial to immediately schedule a meeting with your accountant, finance company, or tax preparation company. Include in the meeting any employees who are responsible for records management, financial record keeping and reporting, or archiving. While you can’t know for sure whether you are at risk of an IRS audit, you can take proactive steps to make the process easier and minimize stress, errors, and delays. For instance, maintaining a comprehensive records retention policy can save your business. Citizens Business Archives offers secure, customizable document storage services that can help you reduce your risk and comply with IRS audits.
Factors That Increase Your Risk of an Audit
Certain factors may make it more likely that your business is selected for an IRS audit. The biggest risk is discrepancies between your tax returns and financial records or publicly available information. Understanding these risk factors can help you avoid them and lower your risk of an audit:
- Unreported income
- Financial errors and typos
- Inconsistent filings
- Lack of documentation or documentation that contradicts the information in your tax return
- Mixing personal and business expenses
- Excessive or high-risk deductions
- Missing records
- Consistent business losses
- Cash-intensive business structure
- Misclassifying employees as independent contractors
- Foreign financial assets
- Failing to file on time
What Happens if You Get Audited
If the IRS chooses to audit your business, it will send you a letter. This letter will request specific documentation, and will give you a deadline by which to reply. An audit can be conducted completely by mail or electronically; however, more complex cases or a lack of response may prompt an in-office visit or field audit. If you respond in a timely manner and are able to provide the agency with everything it requests, the IRS may accept your return as filed. Other potential outcomes include:
- Additional penalties, taxes, or interest charges
- Disallowed deductions
- Criminal charges
You may have grounds to file an appeal if you disagree with the findings of your audit.
Importance of a Comprehensive Record Retention Policy
A record retention policy is a set of rules your company follows to manage documents throughout their lifecycle. It outlines what to keep and for how long, how documents are stored and accessed, how they are dispersed or shared, and how they are destroyed at the end of their lifecycle. This policy is important because:
- It makes it easier to properly classify documents.
- Documents are clearly labeled and properly stored for easy access and retrieval.
- Everyone in your company understands how to save, store, and access documents.
- You ensure compliance with internal policies, legal requirements, and industry regulations.
- Records are securely destroyed to prevent fraud or misuse.
- Your company has a lower risk of loss, theft, or misuse.
- It will be easier to maintain proper record keeping, especially financial and personnel record keeping.
How Working With Citizens Business Archives Can Protect Your Business
Adhering to a strict record retention and storage policy can help you maintain compliance with regulations and industry standards. It will be easier for your financial team, accountant, or tax preparer to find the documentation they need to file your tax returns and support the figures and claims within. Your company will also demonstrate financial transparency and minimize legal and financial risks.
When you partner with Citizens Business Archives, we can support your company’s document and records storage needs as well as your retention and destruction policy. We will keep crucial, sensitive documents in our secure, access-controlled facility. We offer a detailed indexing system that guarantees you always know exactly where everything is so that it can be easily retrieved when needed. Some of the other benefits we offer are:
- Compliance with industry and legal regulations like HIPAA and SOX
- Reduced risk of fines, fees, or lawsuits
- Easy retrieval of documents needed for audits, tax purposes, or evidence in legal challenges
- Proof of financial transparency
- Enhanced operational efficiency
- Lower risk of loss, theft, misuse, and unauthorized access
- Minimized scope of your audit and better audit assessment
If you have been Googling, “secure document storage near me in Tucson, AZ,” Citizens Business Archives can help. We can help you digitize records for proper digital storage, and ensure paper documents and records are securely stored offsite. We also offer professional organization and indexing of physical records, ensuring the system is consistent and easy to use. To learn more, call us today at (520) 882-4434 or contact us online to request an estimate for document storage, indexing, or shredding and document destruction services.
