Your tax audit will go one of a few ways; many people find themselves dealing with correspondence-audit situations, which can be easily remedied through the mail, the IRS’s main mode of communication. Likely, your math was simply incorrect, or they are requesting further information in general.
A tax can get much more complex, however, and a full audit is a different beast entirely. The IRS may ask for an office audit, by which they invite you into the office for questioning, and the audit will be wrapped up that day.
A field audit is the most serious case. In this situation, the IRS will come to your home or office for an investigation that bares no limits, as they are often looking for something specific pertaining to your taxes. Random audits also occur and are nothing to worry about; they will simply review your entire tax return.
In instances such as office audits and field audits, those who have had their taxes prepared by a professional are in luck. After you submit a power of attorney, your appointed tax expert will attend the audit on your behalf. Although, you still need to be involved in the process.
Below is an overview of what you should do to ensure your audit runs smoothly, no matter which you are obligated to partake in.
As aforementioned, you should hire a professional for your audit even if you prepared your taxes without one, and in a field audit, you absolutely need a professional. They know the tax code in all of its linguistic complexity, and will advise exactly what information you should offer, when, and how.
As it is likely that you will not get audited until 12 to 24 months after the filing in question, it is pertinent to gather the appropriate documents, including bills, receipts, spreadsheets, mileage logs, loan documents, and agreements the auditor may be interested in.
You should already have these filed away somewhere, but it is possible recreate them if you need to – you can easily obtain records such as those present on credit card statements or from a hospital, if for example, you’re claiming medical expenses. You can also ask your employer for duplicates of W2s and 1099s, if necessary. Keep all documents pertaining to your tax return organized, so you can easily reference and prove the reasons behind the manner in which you submitted it, resulting in a quick, painless, and efficient audit.
In either an office or field audit, you will undoubtedly be asked questions; in a field audit, more extensively. There are audit guides for examiners on the IRS website, which will educate you on what program they’re following. Read it over to become familiar what they may be looking for. Often, they are curious about the practices, procedures, and administrative details of how you prepared your taxes. Hiring a tax professional will be very valuable in regards to preparing you for the auditor’s questions.
This may be a note that goes without saying, but dressing and behaving professionally, and abiding by the time and date set by the auditor will get you far. More on that below.
Taking the audit seriously will help you face the particular battle you’re facing; approach the situation understanding that there is suspicion that you’ve done something in error, whether it was intentional or not. The auditor will act accordingly. Your best course of action is to answer questions asked of you as thoroughly as possible, making sure to never offer extra information.
A tax audit doesn’t have to be a headache; with the right preparation, you’ll strike gold –
many audits result in the IRS owing you money as opposed to the other way around, which is of course, the common fear.
The number one nugget of wisdom when it comes to audits and taxes in general, is to keep excellent records.This can come in the form of keeping an old school filing system, but it is often easier to manage spreadsheets or use a software, since you are most likely filing online. If you have any paper receipts that you are claiming as expenses, scan them and upload them to a drive.
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