Getting ready for a revenue audit doesn’t have to be overwhelming. Let’s break it down into easy steps to help you stay in control.
Step 1: Gather Bank Statements
For the tax year in question, gather PDF copies of all your bank statements. Some audits might even cover 13 months, including January of the following year.
Step 2: Understand Constructive Receipt
Auditors are curious if you received income but delayed depositing it. Your bank statements can help clarify this timeline.
Step 3: Sort Your Bank Transactions
Download your bank transactions into an Excel or CSV file. This provides a neat overview of your finances.
Step 4: Categorize Your Deposits
Label deposits into these categories:
Account Transfers: Money moved from another account (usually not taxable).
Gifts & Personal Funds: Gifts, refunds, or personal money (not taxable).
Loan Deposits: Money from bank/personal loans (not usually taxable).
Your Own Deposits: Your own funds into your business (not taxable).
Revenue: Business earnings (taxable).
Step 5: Excel’s Organizing Magic
Keep things simple with an Excel sheet sorted by date. This helps you track deposits effectively.
Conclusion: Ready and Set for Audit
Facing a revenue audit becomes less stressful when you’re prepared. Organized bank statements, categorized deposits, and a handy Excel sheet can make the process smoother. Stay clear, stay organized, and tackle your audit with confidence.
Kelly Coughlin, CPA
CEO, EveryDayCPA.com
Founder,TaxRxCenter.org