When business people think "audit," they think first of the IRS. But other state and federal agencies can audit or inspect your business. Many of these audits come unannounced. Now is the time to prepare by being in compliance with the laws.
1. State Sales Taxing Authority
Your state's sales taxing authority may want to audit your records to make sure you are collecting sales taxes and turning them over to the state. To survive an audit:
If your business sells products or services that are subject to sales tax in your state, you must (1) collect taxes, (2) report amounts of collected taxes, and (3) make payments to your state taxing agency as required. The difficult part is determining what's taxable and the amount of the tax. Check with your state's taxing agency to find out the specific regulations that affect your products/services.
2. State Wage and Hour Department
This agency checks to make sure you are keeping good payroll records, that you are paying overtime appropriately and not violating any other state labor laws.
To survive an audit from your state's wage and hour department, find out about the state employment laws in your state. Look up the employment laws in your state, as they relate to minimum wages, child labor laws, overtime and overage, rest periods and other terms of employment,.
3. Immigration and Customs Enforcement (ICE)
Do you know if all of your employees are legally eligible to work in the U.S.? If not, you could be in trouble if ICE inspectors come to your business. They want to see if you have undocumented illegal aliens working in your business. I know of small businesses that have been raided, so don't think you're safe if you are small.
To avoid a problem with ICE, verify the employment eligibility of all new hires to be sure they are eligible to work in the U.S. You must register new hires using an I-9 Form, and these forms can be processed and approved online.
4. Occupational Safety and Health Administration (OSHA)
OSHA can audit your business unannounced or in response to a complaint (usually from a worker. Are you prepared?
To survive an OSHA inspection or avoid one in the first place, you must have a fully compliant OSHA program in place, including an OSHA poster and training for employees on hazardous materials/blood borne pathogens (if applicable)/fire and other emergencies. And, of course, your workplace must be free of hazards.
5. Federal Wage and Hour Department (FLSA Regulations)
Officials from the federal Wage and Hour Department officials can audit your business to be sure you are keeping good payroll records, paying overtime at the correct rate, treating youthful workers appropriately, and abiding by other FLSA (Fair Labor Standards Act) provisions.
The Fair Labor Standards Act (FLSA) provisions regulate wage rates (minimum wages and overtime), child labor, and payroll records for full-time and part-time employees. Review this reference guide to the FLSA to be sure you are in compliance with its regulations in these areas.
IN GENERAL, the best way to prevent an audit or inspection: Keep Good Records.
