Chances are, at one time or another, you will go through the audit process. Many business owners are terrified that they will have to deal with such a situation. But not all audits are created equal. Some are very simple and quick, while others are much more comprehensive. Understanding California tax law and the different types of audits are keys to a solid financial foundation, and will keep you from panicking during the process.
The correspondence audit is the easiest. Here, you did not necessarily violate any type of California tax law – the IRS simply is looking for compliance. They will contact you with a request for a particular piece of paperwork that documents an item on your tax return. All you need to do in this situation is locate the paperwork, copy it, and mail it to the IRS.
The office tax audit is the middle-of-the-road audit. While it shares similarities with a correspondence audit, there is one big difference. An office audit requires you by San Diego tax law to provide the necessary paperwork, but this time you need to go to the nearest IRS office to submit the paperwork in person. It is not particularly dreadful, unless an error is found.
The worst type of audit is the field audit. Here, again, proper documentation of your return is requested, but you need to meet with an IRS agent to pore over your finances and all of your records. It is time-intensive and requires you to answer many questions from the agent. Here, a San Diego tax law attorney is particularly useful in answering questions and providing information safely to the agent.
There are other types of audits, including one that requires you to document every single item on your return, and one designed to inspect for criminal investigations. But the most common three are above, and they are the ones you will run into the most.