If a business or an individual is being audited, the best thing they can do is talk to either an auditor or a tax professional to see how to prepare for the IRS audit.
Generally, the IRS audits will be justified, and the company or individual will be able to clearly understand why exactly they are being audited. Every year when taxes are filed with the IRS, audits occur soon after. The information that one submits for their taxes then gets entered into the computer and assigned a numerical score.
This score determines whether or not a company or an individual will be audited. Items that alters the score and may lead to an IRS audits include: low gross profit margin, high auto expenses, high business use of vehicles, high travel, vast amount of entertainment, and little profit from business operations.
There are different types of IRS audits which include correspondence audits which is generally used for small simple tax returns, field audits which will generally contact the owner of the company via the telephone to interview them about the company, and a TCMP audit, or Taxpayer Compliance Measurement Program audit. This type of audit takes longer and looks through all documents.
If a person is being audited, it is important to be: timely, organized, supply the auditor with the documents needed, during an IRS audit never give more or less information that is being asked for, be honest and do not try to argue or become defensive about any questions being asked, and never use copies of documents.