Tax Audit Defense for Small Business

Four times a year, individuals who earn a profit or have taxable income without simultaneous tax withholding (similar to a W-2 situation) may need to make quarterly estimated tax payments.

Individuals who receive tax forms other than a W-2 usually need to make payments, though there are exceptions for certain professions like fishing and farming.

Exempt industries and W-2 employees without additional income sources do not have to pay quarterly taxes.

Small business owners calculate their estimated tax using IRS Form 1040-ES, which involves three key steps:

1. Determine your taxable income based on your marital status and total income.

2. Factor in any applicable credits and deductions, such as child tax credits or credits for taxes already withheld.

3. Compute the total tax due after these adjustments.

Failing to make sufficient or timely payments throughout the year can result in a penalty added to your tax return. The penalty amount depends on the extent of the underpayment and the delay in making estimated payments.

You can pay estimated taxes online, or choose from two other IRS-accepted methods. Be aware that fees may vary based on the payment method you select:

• Electronic

• Phone

• Mail

Underreporting income is a frequent trigger for small business audits. In deciding whether to audit your business, the IRS compares your reported income and deductions against typical figures for similar-sized businesses in your industry and location.

You will be notified by mail if the IRS intends to audit you. The audit could be conducted through correspondence or through an in-person interview to examine your records. This interview could take place at an IRS office, your home, your business location, or your accountant's office.

The IRS may conduct one of four types of audits to inspect your small business finances: Correspondence, Office, Field, and Taxpayer Compliance Measurement Program audits.

Regardless of the audit type, having the professionals at SmartCloud Tax on your side is essential for navigating the process smoothly.

Leveraging a strong audit defense offers many advantages, including peace of mind and the ability to contest IRS findings on equal footing. SmartCloud Tax’s Audit Defense service guarantees that all your income tax audit documents are meticulously prepared and ready to withstand IRS examination.