When the IRS tells you that it wants to review a previous year's tax return, seeking out a qualified tax professional would be the best choice. Here are some tips you can use to help you survive the audit process if you are a do-it-yourself type of person.
1. You should not ignore the notice. Generally, a response to an audit notice should be within 30 days. The IRS can take action if you don't respond. They would most probably adjust your tax liability, and the next mail that you will receive is a bill.
2. Read and follow the notice. The specific information on the items that are being examined will be given on the audit notice. This will help you bring the necessary documents for the items being examined closely during the audit.
3. Records should be well organized. Making the auditor's job easier will make you look impressive and you will gain some points. Having all your items documented and justified will make the auditor at least believe that you are an organized person. Do not be afraid of attaching an adding machine tape that matches the tax return or group the items in question. With you doing this, important issues will be quickly reviewed by the auditor. Don't settle for less and believe other people who will tell you to just throw all your records in a bag and give it to the auditor for it to be figured out. It is not as simple as that. Proving your deductions is your legal responsibility, always remember that.
4. Missing records should be replaced. Call for duplicates immediately if you find that some of your documents are missing while going through your records. It will give you no good at all if you will just go to the audit and claim that the records are lost or missing. Worst case scenario, your deduction in question will be denied right away since you don't have any supporting documents.
5. Bring only what is necessary. Additional records or items that are not requested in the original audit notice should be left at home. You can politely tell the auditor that the records are at home if he/she is curious of something but the item is not on the original audit notice. Right there, the issue will be dropped most likely.
6. Don't be a jerk. All of the employees of the IRS are people too, that's an opposite of the popular opinion. They're working at the IRS because they are working in their chosen profession but, that does not mean they don't have wives, husbands, and kids. They are trained professional. You will not gain any good if you will take out your frustrations on an auditor. Problems will not be solved even if you will insult an auditor verbally. Physically assaulting one is also a federal offense. Always remember that these people are just trying to do their own job. If the auditor is not courteous or seems unreasonable to you, stay polite. You might make the auditor less willing to see things in your light if you arrive at the audit with a large chip on your shoulder.
7. Provide copies only. Do not bring your original copies to the audit. Do not give them to the agent if ever you bring them. Request the agent to give back the original ones after making some copies. There will be a big chance that your original documents will be missing or lost if you will hand them over to the agent. The IRS isn't responsible for documents lost in your possession so you should be extra careful in handing them over.
8. Stay on point. Friendly and simple discussions are some ways the auditor will be able to obtain some valuable information. Reasons the auditors might have to believe that you are not reporting all of your income and thus expand the scope of your audit might be about an expensive car you just purchased or the vacation you had to the Greek Isles. So, you should give a simple "yes" or "no" response to the questions. Keep it brief and to the point, if you have to explain or expand. Do not give the auditor a reason to expand the audit because of the things that you will share.
Accounting Advantage, Pa