How to Prepare Your Business for an IRS Audit: Bookkeeping Tips You Need
Few phrases cause more anxiety for business owners than “IRS audit.” But here’s the good news: a well-prepared bookkeeping system can turn a stressful audit into a routine review.
Download Our Free Brochure →This guide covers what triggers an audit, how to prepare for one, and how to ensure your books are audit-ready at all times.
1. What Can Trigger an IRS Audit?
- Inconsistent or incomplete filings
- Large deductions without documentation
- High cash transactions
- Income mismatches between 1099s and returns
Tip: Consistent bookkeeping reduces these red flags.
2. Keep Your Records Organized and Accessible
Must-haves:
- Bank and credit card statements
- Receipts for deductions
- Invoices issued and paid
- Payroll records
Fix: Store these digitally with organized folders and timestamps.
3. Reconcile Monthly and Keep CPA-Ready Reports
Reconciliation prevents errors from building up and ensures reports match financial activity.
Why it matters: The IRS may ask for reports going back 3-7 years.
4. Categorize Transactions Consistently
Mistake to avoid: Random expense classifications.
Solution: Use a consistent chart of accounts tailored for your industry. Remote Books Online maintains proper classifications with audit trails.
Download Our Free Brochure →5. Don’t Wait for an Audit-Be Proactive
- Run regular financial reviews
- Address discrepancies quickly
- Back up data securely
Bonus: If you’re behind, use Catch-Up Bookkeeping to fix gaps before the IRS does.
Use Case
A construction contractor in Ohio received an IRS audit letter and had no organized records. Remote Books Online helped recreate 18 months of financials, categorized expenses, and delivered clean reports within two weeks. The audit concluded with zero adjustments.
FAQs
How far back does the IRS audit?
Typically 3 years, but up to 6 years for major discrepancies.
What records does the IRS want?
Receipts, invoices, ledgers, reconciled bank statements, and proof of deductions.
Can I prepare for an audit if I’m behind on books?
Yes. Remote Books Online specializes in Catch-Up Bookkeeping and audit prep.
Do you communicate with my CPA or tax preparer?
Yes. We collaborate to ensure your books and filings align.
Be Audit-Proof. Start with Clean Books.
Remote Books Online helps you stay compliant, organized, and stress-free in the face of an audit.
Schedule your free consultation or call 1-800-583-0148
If you’re behind on your books, our catch-up bookkeeping services can help you get current fast-no stress, no mess.
Stay organized and tax-ready year-round with our flat-rate monthly bookkeeping services.
Tax professionals and CPAs rely on our QuickBooks bookkeeping services to streamline financials and scale their practices efficiently.
