The IRS makes a point of collecting every dollar owed to the federal government. It combs through returns each year to ensure that taxpayers did not cut corners when filing and submitting returns. If your own return has been set aside for review, it is important that you use these five tips to survive an IRS tax audit.
Do Not Ignore the Audit Letter
No need to stick your head in the sand if you get an audit letter from the IRS. Ignoring the letter will only warrant in further action against you and could even result in you owing the government more money.
Instead, you should respond to the tax letter within the stipulated time frame, which is typically 30 days or less. If you fail to respond promptly, the IRS may void exemptions and itemizations you included on your return. It also may raise the amount of money that you owe in taxes.
Ask the Reason for the Audit
The IRS is supposed to inform you of why your return was singled out for an audit. However, if it fails to or if you do not understand the reason, you are within your rights to ask for clarification.
Some of the more common reasons that you could be audited include:
- Inaccurate reporting of income that does not match your W-2, 1099, or statement of cash earnings
- Higher than normal deductions on your return
- Information that is inconsistent with details reported on your prior years' returns
- Random selection by the IRS computer system
You can act accordingly in your own best interests when you know why you are being audited and what information the IRS seeks from you regarding your return.
Know What to Expect
You may envision meeting with an IRS auditor in a cold and impersonal government office. However, in most cases the IRS will correspond with you via the mail during the audit.
This correspondence should tell you why you are being audited and what kind of documentation is being requested of you. You may be asked to send in proof of your expenses or income, for example, or documentation for exemptions that you have claimed. You should send in copies of your paperwork rather than the originals.
Organize and Gather Your Documents
After you receive notification of your audit, you should get busy organizing any paperwork that could be relevant to your case. Some of the documents that may come in handy during the audit include:
- Earning statements like your W-2 or 1099
- Medical bills
- Receipts of charitable donations
- Receipts for home business expenses like Internet bills or office supplies
You should make copies of these documents for both you and the IRS. You should then mail or fax them to the IRS if or when they are requested.
Stay Calm and Get Help
You may become angry or frightened upon learning of your upcoming audit. It is critical that you stay calm, however, and avoid giving into extreme emotions.
You should instead act respectfully to the auditor assigned to your case and be forthcoming with any information requested of you. You should also seek out professional tax guidance if you are unsure of how to proceed or need help understanding what is expected of you.
A tax professional is trained to represent clients during an audit and also knows the current IRS tax codes. This tax pro can act as your intermediary and ensure that you are treated fairly during the process. You also will be advised about what information to give and how to avoid incriminating yourself during the proceedings.
An audit may seem like an overwhelming and complicated task. You can make it easier on yourself and avoid unfair taxes and fines by using these tips during an IRS tax audit.
