Things You'll Need

Instructions

1

Find all of your records that prove that the figures on your tax return are correct. The IRS has the right to look at these any time they like. Organize these records in a logical way. Keep all of the records organized neatly. An auditor doesn't want to sort through a big pile of loose papers and receipts. Neatness will also increase your credibility with the auditor.
2

Organize all proof of business expenses. This proof should always be in writing, even if you paid in cash. Always write down any cash transactions made for your business at the time they occurred. Many people try to deduct personal expenses, such as gasoline, as business expenses, so auditors are looking for this.
3

Have all of your bank statements, receipts and canceled checks ready. The auditor will probably want to see records from both your business and personal accounts. You will also need bank and charge card statements. If you don't receive these on paper, you can print them from your online accounts. Remember that the auditor is going to compare the deposits made to your bank account to your reported income.
4

Know that the auditor is going to want to see your books. Although the auditor may tell you that you're required to keep books, the tax code doesn't demand this. If your only records are a checkbook and cash register receipt tapes, that's fine. You just need to organize them neatly. In addition, if you do maintain a computer, ledger or a journal to record revenue and expenses, the auditor is entitled to see them.