CNN reports that the IRS conducted one million audits in 2015. Take time to understand details about a self-employment or Schedule C audit as you prepare your next tax return.
What Is A Self-Employment Schedule C Audit?
As a self-employed business owner, you file a Schedule C with your annual tax return. It details your business’s profits and losses.
Since Schedule Cs often contain errors, an IRS agent may request an audit up to six years after you file the return. The audit verifies the accuracy of your reported income, expenses and deductions.
How Does A Self-Employment Audit Work?
You’ll receive a written notice if your Schedule C is flagged for an audit. It will detail the reason for the audit, which could be anything from small math errors to glaring income omissions.
Respond to the notice immediately. Correct any math errors, and return the corrected tax forms or confirm the phone or in-person audit appointment.
Before your audit appointment, carefully review the tax return in question. Gather and organize all supporting paperwork and receipts, and verify that your calculations are correct.
During the audit meeting, the auditor will comb through your Schedule C and ask you to explain any questionable income and deductions. Consider contacting your tax professional for document prep assistance and support throughout the audit process.
How Long Does An Audit Take?
The actual audit meeting could take two to four or more hours. The type of audit, complexity, information provided and outcome affect the audit’s length. At the end of the audit, you should know if you owe taxes, penalties and interest or if your tax return was correct.
A Schedule C tax audit verifies the accuracy of your tax return. Get in touch with our professionals at 720-398-6088 for assistance if you believe you prepared an inaccurate tax return that’s put you at risk or if the IRS has contacted you to undergo a Schedule C audit.