Post-Audit Procedures: Next Steps for Salt Lake City Businesses and Individuals

For many Salt Lake City businesses and individuals, word that their tax audit has concluded is cause for celebration. However, this is by no means the end of the process; in fact, there is much to be done after an IRS audit in Salt Lake City to ensure any discrepancies are taken care of and one is prepared for the next audit. In this article, you will learn about the important steps you have to do after the audit, whether you are a resident or a business entity in Salt Lake City. This is to help you protect your financial standing and prevent any complications that may come afterward.

Understanding Audit Result

Review and Interpret the Findings: After an audit, the first thing you want to do is review and understand the findings. Whether your audit came from the IRS or Utah State Tax Commission, you will be provided a workpaper-type report including but not limited to:

1. Overview of the Audit Process
2. Areas Looked At
3. Anomalies or Issues Found
4. Recommended Changes to Your Taxable Amount
5. Explanation of any penalties or interest, if applicable

Read the report carefully. If you don't understand something from your reading, or if you have questions, don't hesitate to ask the auditor to explain or seek advice from a tax professional.

Response to the Audit Findings

Now that you have your audit results, you will want to decide how to respond. You will generally have one of three options:

1. Agree to the findings: If one does agree with all the audit findings, then he or she can sign the audit report and pay any additional tax, penalties, and interest that resulted.

2. Partial agreement: A person may agree to some findings while disagreeing with some. In this scenario, one can work with the auditor to come to a truce over the disputed issues.

3. Fully disagree: In case you fully disagree with any of the findings, you have the freedom to appeal against such decisions.

Knowing the process and timeline are important if you decide to appeal. For IRS audits, usually you have 30 days from the date of the audit report. If your audit has been conducted by the Utah State Tax Commission, your time will vary - you will want to follow the instructions that come with your audit report.

Corrective Actions

Whether you agree with some or none of these findings, however, you must take the steps required to correct the issues that were uncovered. This may include:

1. Updating your accounting practices: If there have been errors in your bookkeeping or accounting practices, it is high time you corrected them. This can well involve adopting new software, hiring a professional bookkeeper, or just training more your staff.

2. Improved record keeping: Good record keeping is very important to tax compliance. If the audit has revealed your documentation shortcomings, you should institute a system through which you keep all your records from henceforth.

3. Particular compliance problems: If the audit showed that you were not properly handling some of your tax responsibilities-for example, payroll taxes or sales tax-you took immediate actions to correct the problems and make sure that the same problems will not continue in the future.

4. Review of your tax planning strategies: The audit may have pointed out certain weaknesses in tax planning. You could consult a tax professional to discuss ways in which you can minimize your tax liability within the ambit of all applicable laws and regulations.

Paying Any Additional Taxes or Penalties

Now, when the result of an audit is some additional tax liability, penalties, or interest, you must settle the payment. For this, the IRS and the Utah State Tax Commission provide various ways of collecting the following:

1. Full payment: Of course, you may have enough money to pay the full amount that is due, which is the easiest method.

2. Installment Agreement: You can't pay the full amount right away, so you enter into an agreement in which you are allowed to pay over time.

3. Offer-in-Compromise: This is where, in certain special situations, you may be able to settle your debt for less than what you owe. The IRS will generally accept such an offer when it can be shown that allowing such a settlement would be in the best interest of the government because collection of the full amount creates an extreme economic hardship.

4. Abating penalties: If you were assessed penalties, you may have the amount reduced or abated if you can show reasonable cause for your non-compliance.

Consider your payment options and select the one that is most appropriate. Interest is still accruing on unpaid taxes so, in most cases, it is best to pay your taxes as soon as you can.

Preparing for Future Audits

Although no one wants to endure another audit, the sad reality is that once you've been audited, your chances of being audited again in future years also increase. Take the experience you have gained in this audit and prepare yourself for upcoming exams with the help of the following tips:

1. Maintain records on hand: Maintain accurate, complete records of your income, expenses, and deductions. These are any receipts, bank statements, invoices, or other documents related to.

2. Keep abreast of changes in the tax laws: Tax laws and regulations change with frequency. Try to be abreast of any changes that may influence your particular tax situation.

3. Consistency in reporting: Make sure what you are reporting on your tax returns year in and year out is closely consistent. Major fluctuations in income or deductions without reasonable explanations can be an invitation for audits.

4. Seek professional help: If your tax situation has become too complex to handle by yourself, hire a certified public accountant or a tax attorney in Salt lake city. They ensure that you comply with all the law provisions concerning tax.

Rebuilding Your Relationship with Tax Authorities

Sometimes, an audit may lead to a spoiled relationship between a taxpayer and the revenue collection authority. When an audit is over, the following steps will help in rebuilding the relationship.

1. Be compliant: The best way to be in the good books of tax authorities is by wholly complying, from now on, with all provisions of tax laws and regulations.

2. Be responsive: In case of any notice from tax authorities, deal with the matter to be clear about the issues extended as soon as possible.

3. Be Proactive: If you find that there is a material error or mistake on a filed tax return, then don't wait until an audit occurs. Immediate filing of an 1040X amended return will speed up correction of such an error.

Business Impact Section

There are other business implications of being audited for businesses in Salt Lake City. Consider the following:

1. Review your business processes: Remember, the findings of an audit should not be a document for your business processes to deal with tax issues.

2. Communication: If the audit has implications for investors, partners, or other stakeholders, be sure to communicate your findings and the plan for resolving the problems to the parties involved.

3. Go through your insurance coverage: Some policies offer coverage for some of the costs related to audit taxes. Check through your policies and see whether you need such additional coverage.

Seeking Professional Guidance

It gets very challenging to deal with the landscape post-audit, and more importantly, if discovered are major issues or it resulted in huge liability for added tax. You should seek professional guidance in the following cases:

1. Tax attorneys: They will provide you with the necessary legal advice on your rights and options in case you are considering an appeal of the results of the audit.

2. Certified Public Accountants: They can assist you in understanding the financial implications of the audit and help you devise means of improving the accounting system.

3. Enrolled Agents: These are tax professionals empowered by the IRS to represent you in dealings with tax authorities.

Conclusion

Although the end of an audit is like crossing the finish line, it is really the starting point of a new stretch in the journey of tax compliance. An audit experience could become an opportunity to improve: through careful results of an audit, taking the proper corrective actions, addressing any additional tax liabilities, and preparing for the future. Keep in mind, the goal is not to survive this audit, but to create practices that will continue compliance and preparedness for many, many years with your company.

Whether a business or an individual, if you want to help make sure that you are on firm footing with both federal and state tax jurisdictions, understanding and following these post-audit procedures will help move you toward resolution and improved tax management in the coming days, whether it be an IRS audit or your state's Tax Commission examination results.