Being Audited By The IRS, What Can I Expect?

It's hard to say without knowing the exact nature of your business, but in general, they will do testing to estimate your actual income and compare the results to your reported income. For this purpose, they might contact your vendors and clients for any transactions they had entered with you. They will look into your bank accounts and search for any potential accounts in order to determine whether your personal expenses had been intermingled with your business transactions and whether you had been hiding income. Depending on your tax situation, they will start with the oldest year the statue of limitations is allowing them to reach. Be prepared to show the supporting doents, such as receipts, titles, etc, for any transaction in question. At the end of the audit, they will come up with an outstanding tax liability calculated at their amounts. This amount WILL BE over-stated and you will need an experienced(!!!) CPA to reduce this amount for you. In fact, you should not enter into any interaction with the IRS by yourself. As soon as you receive a letter from them, take it to a CPA right away, before you make all the matters worse for yourself. Because most likely there will be a tax liability in your situation, you need to look for the ways to minimize it now. Only a CPA will be able to do it for you.