Audit? Don’t Panic!

Audit? Don't Panic!

Keep accurate records & be honest.

It's horrible when law abiding citizens find themselves in great fear of any government agency.
Jackbooted thugs dragging business owners away to prison and confiscating their hard earned wealth is the fabric of nightmares, especially for small business owners.

While it's true that being sloppy with your taxes, or worse still, trying to actually cheat on them, opens you up to the full and considerable power of the IRS to force compliance, if you are diligent, accurate and truthful, the IRS is not to be feared, even if you are under audit.

Fear of an audit mustn't keep you from claiming your rightful deductions. The IRS wants to audit you? So what? Keep diligent records and be honest. Get proof letters when you donate to charity. Many religious organizations and churches do this anyway. Keep those letters with your tax records. When you donate yard sale quality goods to a thrift store, value them at yard sale values. Make and keep detailed records of what you donated, and get and keep a letter from the organization.

Think of it like this. An audit is the IRS asking for proof of what you told them in your return. It might be as simple as a letter asking for specific documentation. Notify your CPA immediately of any correspondence you receive from the IRS. Your CPA will review it and advise you on the best path forward.

Keeping copies of the documents used in preparation of your return is vital. Your CPA will return them to you when the return is complete. You can avoid the stacks of paperwork piling up in your office by storing them digitally. The IRS now accepts electronic documents to substantiate deductions. Keep good backups of all your files, preferably in more than one location.

Cheat and expect to get caught! When you're honest, rely on your records to prove it. A great CPA will ensure in advance that your records fully support your return and advise you of any gray area or danger zone.

You don't have to face this alone. Let your CPA represent your interest with the IRS. Your CPA is experienced, knows the law, and knows what records and documents best support your cause. They are best able to handle any issues that arise amid the audit and able to help minimize any negative consequences caused by error, omission, or even past indiscretion.

Does my small business need a CPA

 

Do I really need a CPA for my small business?

It doesn't matter how small your business is, even a single owner with no employees, there are compelling reasons to consider CPA services.

1. State License.

The title CPA, or Certified Public Accountant, can only be used by a person licensed to do so by their state. Acquiring and maintaining that license requires years of study and constant ongoing education to stay current on tax law. The title "Accountant" has no such stipulation, and may not have any license. Be sure to look for "CPA" after the person's name. Another designation one might see is "EA" or Enrolled Agent. This designation indicates they have passed an IRS exam, but this is not the same as CPA and EA's are not held to the same standards for licensing as are CPA's. The exam a CPA must pass includes many facets of finance and tax expertise, and the CPA must diligently follow tax law changes to properly serve their clients, and to maintain their license.

2. Tax planning and preparation.
Not every CPA will specialize in small business taxes. All CPA's, however, are required to stay familiar with the dynamic tax laws. Understanding of US tax code is a substantial portion of the CPA exam and many CPA's will take classes each year to ensure their own understanding of current tax code.

The IRS requires each tax preparer to have a preparer tax id number (PTIN) and distinguishes between EA's (enrolled agents), CPA's, attorneys, and other un-credentialed preparers. An accountant that is not a CPA may be able to prepare, and even sign, your tax return, but you have no assurance of his or her ability or competency and may have limited representation rights, or no representation rights with the IRS.

3. Detailed analysis and advice.
While a bookkeeper does your routine data entry like one does in QuickBooks and an accountant will review the data and put together your important financial reports like your profit and loss statement and balance sheet, a CPA can do more in-depth, detailed, analysis of your monthly and yearly reports to advise on various financial matters. The CPA's training has prepared, qualified and certified them to give trustworthy tax and financial advice.

4. Audits.
A strong argument in favor of choosing a CPA to prepare your business taxes is the authority to represent you to the IRS in the event of an audit. Non-CPA accountants, except EA's, are severely limited in their ability to represent you or otherwise work with the IRS on your behalf or under your authority.

Because all business are unique, there is no simple blanket answer to "Do I really need a CPA for my small business?". There is, however, a strong argument in favor.

Donation Value Guide

It has been said that one man's trash is another man's treasure, but the IRS may not agree. When making a non-cash donation, and claiming it as a deduction from your taxes, you must assign a reasonable value to that gift. Ensure that what you are giving is in good condition and consider what the agency might be able to receive if they were to re-sell it. Obviously, you'll set higher values for brand name goods that are barely used while setting lower values if the brand is generally considered "cheap" or if the item shows a little more age.

The Salvation Army has provided some guidance in this, as shown below, but remember that the numbers are general guides and you must use your own discretion to properly valuate your donated goods

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Estimated Tax for Business Owners

Estimated tax and pre-payment:
Everyone in the U.S knows that income tax is a fact of life. Certainly by the time a person has started their own business they will have at least heard of estimated tax, but might not know what to do about it. You might have questions about how it's calculated and how to make your estimated tax payments to the IRS.
 
What are we talking about?
The IRS requires taxpayers to pay tax throughout the year. If the amount paid during the year at each deadline is less than the IRS required percentage of the year end total, there can be penalties & interest. Tax law may change each year. For current details on how to calculate and pay your estimated taxes, you can read about it at the IRS site: Estimated Tax
 
You don't have to do this alone.
Trust an experienced, certified CPA to help you figure this and keep you out of hot water with the IRS. The CPA's extensive training will ensure the amounts are calculated according to current rules and the forms and payments are filed within each deadline.

What makes a great CPA?

When you need a CPA, how will you know if the one you're considering is a good fit for your business? Are you looking for just tax preparation help, or do you prefer a CPA that will take an active role in helping your business to succeed?
 
Possibly the first point to consider is the ability to communicate with your CPA. Can you reach them on the phone when needed? Do you get prompt replies to email inquiries? Do they have a website that answers your questions and is easy to navigate? If you can't reach your CPA when needed, you should probably consider someone else.  Accountability Team LLC can be reached by telephone, by email and by using the contact form on the website.
 
Some people are confused by various terms for different accounting roles such as accountant, enrolled agent or CPA. The title accountant can be used by anyone, regardless of any qualifications. The IRS grants the title Enrolled Agent either to former employees or those that have passed an IRS exam that covers tax preparation. There is no educational component to this title beyond passing the exam.
 
In Florida, a CPA must have a Bachelor’s Degree in Accounting and pass a four part in-depth exam that covers tax preparation and the full gamut of accounting including auditing, business law, finances, taxation and much more. A CPA receives their license from the Florida Department of Professional Regulation who can also revoke the license for misconduct. An accountant or enrolled agent are not regulated by the FDPR, and so have no license to lose. There's no government agency holding them to the stringent standards that a licensed CPA must meet.
 
An accountant or enrolled agent may not use "CPA" in their name unless they are a licensed CPA. To verify that an accountant truly is a CPA, the information is available at the Florida Department of Professional Regulation website where there is a link that says “Verify a License”.
 
Passing the exam once isn't the end of the story for a CPA. To continue as a licensed CPA, the accountant must participate in CPE or Continuing Professional Education with additional exams to go along with it. Tanya Higginbotham's  25 plus years of experience and a mass of satisfied customers ensure you that she has the knowledge needed to help your company succeed.
 
To be a great accountant or CPA, one must stay up to date. Tax & business laws constantly change. No business can afford to have a CPA who is a year behind in training. Accountability Team LLC is committed to keeping themselves and their clients up to date on changing laws and the impact they have on the client's business.
 
An understanding of related technologies is another huge factor in being a great CPA. Tanya has experience in software integration and Cynthia Alloway is a QuickBooks ProAdvisor. Together they are very comfortable with the various pieces of software needed to keep up with modern accounting.
 
All of these points are important, but the thing that really sets a great CPA apart from anyone else is what are called "soft skills". At the beginning of this text I mentioned that you must be able to reach your CPA to communicate with them. But, once you do reach them, or when they reply to your email message, are you able to share ideas and accomplish tasks? The members of Accountability Team LLC focus on the success of your business and will communicate with you at whatever level best suits your business and your personal style to ensure you understand the best course to help your business thrive. Soft Skills help the CPA comprehend your personal and business goals, identify problems to craft solutions and to build a plan to meet your goals.
 
Let Accountability Team LLC get to work for you. Give us a call at 813-689-6413