What does the IRS auditor look for in an audit?
INCOME: IRS will review records to determine whether your stated income is accurate by looking at bank statements and your sales ledgers. If your business has a lot cash transactions, IRS may further probe your stated income for accuracy. IRS may refer your case for criminal prosecution, if the IRS finds that there is a significant under reporting of income. EXPENSES: IRS will look for back up documents and receipts which will support your claimed expenses. IRS may try to determine whether any of your personal expenses were claimed as business expenses including usage of your auto, entertainment expense, travel expense and so on.
