Continuing from Part 1, this section covers professional help, audits, and special situations.
Finding the Right Professionals
A good team is essential. You typically need:
- CPA/Tax Advisor: To guide you through tax planning and compliance, not just tax preparation.
- Attorney: To assist with contracts, liability issues, and entity formation.
Surviving an Audit
If the IRS comes calling, don't panic. Be prepared:
- Documentation: Organized records are your best defense.
- Representation: Consider having your CPA or tax attorney represent you. You generally don't have to appear in person if you have a representative.
- Honesty: Be truthful but only answer the questions asked. Don't volunteer extra information.
Special Situations
- Independent Contractors: Misclassifying employees as contractors is a major risk (see our separate article on this).
- Start-ups: Understanding the difference between "sweat equity" and financial investment is critical for allocating ownership and tax basis.