A practical approach for Western New York business owners
Running a small business in Western New York means wearing a lot of hats—and sometimes, that includes facing an audit. Whether it’s federal, state, or local, an audit doesn’t have to feel overwhelming if you’re prepared.
At Gleason Tax Advisory, we work with business owners across the Southern Tier and Chautauqua County to stay organized, compliant, and confident year-round. Here’s your practical guide to navigating an audit—and ideally, avoiding trouble before it starts.
Step 1: Understand the Types of Audits
IRS Audits (Federal)
These focus on your federal tax returns—income, expenses, payroll taxes, and deductions. Audits may be random, but they’re often triggered by red flags like unusually high deductions, inconsistent reporting, or missing forms.
New York State Audits
In New York, audits commonly review:
- Sales tax filings
- Payroll tax and withholding
- Unemployment insurance
If your business operates across state lines, expect additional scrutiny.
Local Audits
Municipalities in Western New York can be more active than many business owners expect. These audits may involve:
- Business license compliance
- Property taxes
- Gross receipts or local fees
Step 2: Keep Your Books Audit-Ready Year-Round
Preparation is your best defense.
- Separate business and personal finances
Use dedicated bank accounts and credit cards—this is one of the most common issues we see. - Keep clean, organized records
Save receipts and invoices (digital is fine). Make sure everything is easy to retrieve. - Reconcile accounts monthly
Catching errors early prevents bigger problems later. - Track mileage and travel in real time
Reconstructed logs rarely hold up under scrutiny. - Bonus Tip for WNY Businesses:
If you collect sales tax—especially in seasonal or tourism-driven areas—double check that collections and filings match exactly. Sales tax audits are one of the most common we see locally.
Step 3: If You’re Audited—What to Do
- Read the notice carefully
Understand what’s being audited and for which years. - Respond promptly
Deadlines matter. Ignoring notices makes things worse. - Get professional guidance early
Having a plan in place can make a significant difference in the outcome. - Provide only what’s requested
Don’t overwhelm auditors with unnecessary documentation.
Step 4: What Not to Do During an Audit
- Don’t argue or get defensive—keep communication professional
- Don’t show up unprepared—especially for a site visit
- Don’t answer questions that weren’t asked
- Don’t assume the auditor is wrong—if something is incorrect, prove it with documentation
Step 5: Stay Ahead of the Next Audit
- File all returns on time
- Conduct an annual self-review (especially sales tax and payroll)
- Train your team—anyone handling money or records should understand proper procedures
- Stay current on local regulations—municipal rules can change frequently
- Ask for help when needed
A Local Perspective
Small businesses in Western New York face unique challenges—from seasonal revenue shifts to local compliance requirements. Staying organized and proactive isn’t just about avoiding audits—it’s about building a stronger, more resilient business.
If you have questions or want to put a plan in place, Bruce is here to help you stay Happier, Healthier & Less Stressed.
