IRS Audit Small Business and Self-Employed-documents

I met a small business owner yesterday who recently received an audit notice (letter 2205-A) from the IRS Small Business and Self-Employed division. The IRS will be increasing the number of audits in this sector this year, if you receive this letter contact the firm that prepared your returns and ask them how they will represent you, ask good questions about their experience and fees with audits. If you self-prepared, I recommend you contact a few firms about representing you and don’t pay 100% of the fees in advance.

This owner had made the mistake of sending the IRS their original documents and didn’t make any copies. Don’t ever do this; be sure to only send copies of all documents and receipts. We had a client who was an owner-operator truck driver that provided his originals to the IRS, the IRS misplaced the documents, the agent retired, and without any proof, the subsequent examination resulted in a huge tax liability for him. The story had a good ending, he hired our firm (after not getting any results from a large-they advertise a lot on TV firm) and we were able successfully negotiate an Offer-In-Compromise for him. It is likely that he could of avoided the expense of hiring any firm had he make copies of his originals.