It's no secret that IRS resources have shrunk significantly in recent years. Nonetheless, the IRS still managed to audit around ten percent of large businesses in 2016. (Internal Revenue Service Data Book, 2016, Publication 55B, Washington, D.C., March 2017). Despite dwindling IRS resources, businesses are likely to find themselves the subject of an IRS audit at some point in their life cycle. Given this inevitability, company executives would be well-advised to implement and institutionalize certain protective procedures that can mitigate the potential consequences of an audit. With this in mind, this article sets forth a list of actions a company can take to facilitate a smooth and robust audit defense.

Establish Sound Recordkeeping Policies

When it comes to a tax audit, don't expect the IRS to just take your word for it. Although it's neither cost-effective nor prudent to retain all documents indefinitely, a company that does not retain or prematurely destroys pertinent documents will likely find an IRS audit to be an uphill, if not impossible, battle. To address these competing interests, companies should develop a comprehensive written policy for the retention and destruction of documents.