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What is a Business Tax Audit?

An IRS audit is an examination of an individual’s or organizations’ financial information to make sure that person or organization is reporting all of situs judi online their accounts in accordance with U.S. tax laws.

IRS audits occur when the IRS identifies errors in a tax return, typically one that was filed within the last three years. The IRS may flag a tax return for many different reasons, but the most common reasons why you may be audited include the following scenarios:

Claiming business losses for multiple years
Reporting unexpected, high income levels
Taking several substantial deductions
Key takeaway: A tax audit can occur when the IRS detects an error on a tax return, typically one that was filed within the past three years.

Small business audits
While public companies are subject to strict auditing standards – the Securities and Exchange Commission (SEC) requires that third-party auditors review their financial statements – most small businesses file their own tax returns as a Schedule C company, or sole proprietorship.

This means more oversight from elsewhere: the Internal Revenue Service.

“The IRS also looks at small businesses that file Schedule C much closer than if that business would file their business tax returns as an S corporation or partnership,” said Peter Greco, founder of CSI Group, an accounting firm. Its main concern is that small businesses aren’t hiding sales or exaggerating expenses, he said.

Key takeaway: The IRS carefully examines tax returns from small businesses, especially sole proprietorships.