Anyone with a small business ever get audited by the state????

OMG! Its scary but don't panic, I owned a drywall construction company in Florida and Colorado for over 26 years and was audited 5 times in that time span. Each one was scary but as long as you are up to date on all your licenses, insurance and all taxes paid accurately to what you earned as the company you own and operate and be sure all your employees taxes were deducted and accounted for correctly, you have nothing to worry about. We got nailed for the taxes for an employee that hadn't filed his taxes for 5 years! They audited us because they claimed we didn't deduct the correct taxes for the employee, but after a few months of BS we got it all straightened out. Be sure you have all your records for the past 7 years because they can ask for them, receipts and anything else business related including your own income you claimed. Good luck and remember be prepared for the audit completely they hate when you are disorganized, trust me we weren't the best at that lol!! Remember these audits are "random" so I wouldn't sweat it.

Heres a good read and a video from IRS to help

http://www.inc.com/welcome.html?destination=http://www.inc.com/guides/2010/06/survive-tax-audit.html

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/IRS-Audits