If you have received a notice in the mail from the IRS that you are being audited, you may be ready to lose your mind. It can be a scary situation, but you will survive it if you plan ahead and are prepared come time.
The IRS is likely auditing you because they found some inconsistencies in your financial statements or you have neglected to claim all of your income on your tax return. Typically, a red flag will go up on your return and the IRS will inspect it closely. If the items are still not matching up or there are serious mistakes or habitual mistakes over the years, you will hear from an agent at the IRS.
One thing to keep in mind is that you should always comply with an audit to make it easier on you. Below, we will go over some tips to help you keep your head on your shoulders during this tough time.
When you receive a letter in the mail from the IRS, you may instantly freak out. All letters from the IRS should be opened immediately as you do not want to miss out on an important notice.
There are two different kinds of audits you may face. The first type is a correspondence audit which is done through the mail. You never have to be face-to-face with an IRS agent and you will send all documentation requested through the mail.
The second type of audit is a field audit in which the IRS agent comes out to your home or your place of business. You may also have the option of setting up a meeting in the IRS office.
Before you start to panic too much, start gathering all of your tax documents. You should typically hold on to your tax returns for a minimum of three years. If you do not have all of your previous tax returns, you will need to request a copy of them through the IRS.
You never want to be unprepared for a meeting with the IRS so start planning early and make sure you grab all of the requested documentation as well.
If you find that you are missing documentation for an item you claimed on your taxes, you need to begin retracing your steps and getting the documentation you need. For instance, if you made a donation to a charity, but you do not have the receipt, you need to contact that charity and have them look up the information and print off the proper documents for you.
If you are not asked, don’t bring it up. When it comes to an IRS audit, there are guidelines that the agent must work within and if you voluntarily open a new door, they can enter in and look around.
If you do not have to jump through hoops for something, don’t do it. Of course, you do not want to lie to the agent, but you do not have to be overly friendly either. It is also important that you do not shy away from them and you should remain confident.
An audit can take a couple of months or even a year in some cases, so this may not be the first time that you see the agent throughout the course of the audit.
If you are facing an audit and you are unsure of what to do, you should hire a professional to help you get through it. Often, you will have the option to purchase protection from the tax agent you work with. This protection will cover you in the event you are audited by the IRS.
If you do hire a tax professional to help you, you will find that the process is much easier to get through. Your agent can communicate for you and help you gather your previous tax returns and more.
The most important thing you want to remember is that you should never ignore the IRS. They will not go away and ignoring the situation will actually make the entire thing worse for you.
Take a deep breath and start gathering your documentation early. Always be professional and provide all documents in a timely manner to avoid further penalties or questions.
Stephen Elmore