J.K. Lasser's Small Business Taxes 2023

CHAPTER 34Handling Audits with the IRS

• Types of Audits
• Appeals
• Litigation
• Mediation
• Taxpayer Bill of Rights
• Taxpayer Advocate Service
• Special Audit Rules for Partnerships

Alert

At the time this book was published, Congress was considering tax changes that could affect 2022 tax returns and planning for 2023. Check the online Supplement in February 2023 at www.jklasser.com or www.BigIdeasForSmallBusiness.com to see what changes have been enacted and when they become effective.

The word “audit” sends shivers up the spine of a small business owner, and for good reason. Tangling with the IRS diverts the owner's attention from running the business now to hashing over old taxes. An audit may also wind up costing the owner hefty professional fees for representation and additional taxes, penalties, and interest. While audit rates have been very low in recent years, increased IRS funding for enforcement–including the hiring of 87,000 new agents–means more audits are ahead. A promise by the Treasury Secretary that audit rates will not increase for those with income below $400,000 is no guarantee. When you receive a letter from the IRS stating that you are under examination, you need to understand what it means and what you can or should do.

This chapter is intended to give you only an overview of the audit process and your options for dealing with it. For further information about tax audits, see IRS Publication 1, Your Rights as a Taxpayer; IRS Publication 556, Examination ...