There is generally no reason to be frightened of an audit if you usually have been moral and open in your accounting methods. However, it is usually best to be prepared for an audit actually to make certain that it runs smoothly. Different types of audits involve different preparation methods.
If a Small Business Accounting Software business is generally brought up for an audit by the IRS, there are generally more than a few things you can actually do to organize your business for audit. First, review the tax returns that are as such being audited. Make sure that you are prepared to clarify how you or your tax preparer came up with the figures in the return when you go into the audit. If you don't know how your tax preparer came up with the figures, or you actually have any questions, you should contact your tax preparer prior to the audit for any clarification needed so that you are thoroughly prepared for the audit.
Organizing records used to prepare your tax returns yearly is basically a great way to maintain proper accounting before an audit. However, if you usually have not organized your records as you filed year by year, now is usually the time to arrange them for the audit? Make definite that the person performing the audit has generally access to all records used to prepare the tax returns. For the audit to go easily, these records should be organized in a logical fashion.
In addition to making an audit quick and painless, this organization will lend you credibility with the auditor, thus making the auditor take things in stride if a small issue does arise during the audit.
Your audit notice should tell you what documentation the auditor wants to see during the audit. Typically, auditors may want to see bank statements, canceled income checks, receipts for expenses, and your financial records. If you have a smaller Small Business Accounting Software business, you are not required to maintain a formal set of financial records such as journals and ledgers.