With tax season finally coming to a close, the dreaded IRS audit season is about to commence.
While many people have that nagging fear they will be audited, the chances of being audited is fairly low.
Only About 1 out of 100 people that file taxes are actually audited.
However, if you do happen to be one of the unlucky people selected by the IRS for an audit, here are a few easy steps to take to make the process go as smoothly as possible:
- Don’t Ignore Mail From the IRS - It may be frightening, but you simply must open all mail from the IRS.
The IRS typically provides taxpayers with about 30 days to respond to letters and demands and it is best to face the problem head on and resolve the issue.
If you decide to ignore the letter, the problem will continue to grow as the IRS adds penalties to your taxpayer account.
- Contact a Tax Professional - When you receive official communications from the IRS, it is important to consider hiring a tax professional to represent you and communicate directly with the IRS.
Since the tax code and tax laws are very complicated, hiring a tax professional who is knowledgeable to handle your IRS audit is advisable.
In addition, it can save you money in the long run. The IRS professionals you interview should have broad experience related to IRS audit defense and representation and be licensed as a CPA or tax professional.
- Get All Records and Documentation in Order – Normally, the IRS audit will be focused on a small portion of your overall tax return.
It is important to find out what parts of your tax return are in question and have the necessary paperwork and documentation to prove your case.
Since the IRS can audit up to three years prior, it is wise to retain all tax documentation for at least three years. However, if you are missing a file or receipt, don’t stress out.
You can easily get copies of previous tax returns and lost receipts can normally be replaced as well.
For example, most non-profits keep good records and will be able to supply you with a copy of your giving receipt even if you neglected to keep the evidence of a charitable contribution.
- Remain Calm - The best advice for an audit is to be respectful and kind to your assigned IRS agent.
Do not begin the process being rude and difficult. It will serve you to be kind and you will see the agent is just doing their job and the process will be much smoother.
Also, no matter what you do, do not hide or cover anything up. As long as you are honest and upfront with the auditor, the IRS agents are normally reasonable.
It is important to note that tax returns are selected for audit in a variety of different ways including random sampling.
It is important not to panic and to realize that, if handled correctly; many IRS audits can result in an acceptance of return without change or even perhaps a refund.
When faced with an IRS audit selecting a qualified Certified Public Accountant to provide IRS audit defense is well worth the investment.
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License: Royalty Free or iStock source: http://www.istockphoto.com/
Brian Hill, the Founder and President of Professional Tax Resolution, has helped hundreds of individuals and businesses with tax issues.
His firm specializes in representing individuals that owe back taxes and want to reach a settlement with the IRS.