Here are some tips:
- Create a separate file specifically for audits that contains copies of all quarterly payroll tax reports for state and federal agencies, as they are always required. On the federal level they are 941 forms while the state forms vary. If you file them yourself, keep copies. If you have a payroll provider, such as ADP or Paychex, make sure you receive copies from them.
- You will always be asked for payroll records for the audit period in question, so keep your payroll and taxes up to date. Your financial records will be compared to the tax filings, so do not fall behind in entering them. Not having up to date financial records is a sure sign to any auditors that something may be amiss in your company, even if it's not.
- Reconcile your accounts every month - this is a good way to remain on top of financial data entry, not to mention understanding your financial picture. You will be required to provide sales journals, sales tax reports, and your general ledgers if requested.
- Be sure to keep copies of Workers Compensation Insurance and other policies on hand that may be needed.
- When paying bills, make sure you track and maintain records on payments to independent contractors. This will be reviewed by auditors to make sure you are not trying to avoid paying any withholding payroll taxes on individuals who should really be treated as employees. You will also be required to show any certificates of insurance for subcontractors you may have, if applicable.
If you follow these tips and prepare, prepare, prepare, and even provide these documents to your auditor prior to meeting, the entire process should go smoothly. Then you can get ready for the next years' audit!
Benay handles the annual audits for all of our clients, leaving them free to focus on running and growing their businesses. Our clients never experience that last minute rush to gather records and reports because we always have the necessary records on hand. If you want a business management company that frees you to focus on growth and development, please give us a call.