An IRS audit may sound like an intimidating thing, but in reality, it just means that the IRS is checking everything out to ensure that you’re keeping your tax payments up to date. There are several reasons you could be audited, but in this article, we’ll focus more on what you should do if you find yourself in the auditing process.
1. Don’t Panic
It’s easy to get swept up in panic mode when the IRS notifies you that your return is being audited. This can cause delays in your current year’s return or other inconveniences. Overall, an audit is going to be inconvenient, so the sooner you can come to terms with it, the easier the process will be.
Keep your cool, and don’t worry too much. If you’ve had your taxes prepared by a professional service, you should be in the clear as long as you were honest about your income. Hiding income or lying on a tax return is an excellent way to incur stiff penalties, including felony tax evasion, so always be sure to report any and all income to the IRS.
2. Check With Your Tax Prep Service
Many professional tax services will offer some form of a “guarantee” that your taxes will be filed accurately. If you find yourself being audited, it’s time to get together with your tax professional and go over everything in detail, just to be sure nothing was missed during the filing.
It’s important not to get upset with your tax professional, as a tax audit doesn’t necessarily mean they’ve done anything wrong. Keep your cool and work with your agency to address the problem together.
3. Consider Representation
As if the tax process weren’t intimidating enough, if you find yourself at an IRS audit appointment, you may want to bring representation, not only for legal protection but to alleviate some of the stress of attending the appointment on your own. Though you are technically under investigation in a way, you still have rights, and representation is one of those rights.
Your tax preparer, a certified public accountant, or even an attorney can represent you at this appointment. You still retain the right to fair treatment, confidentiality concerning your financial information, and a right to appeal any decision made by the IRS.
An IRS defense organization or attorney will provide you with able representation, and work to ensure that your rights are respected and the proceedings are fair. It’s always the safe bet to have a representative familiar with the tax process and audits, so you know exactly what you and the IRS are responsible for.
4. Create A Plan For Any Payments You May Need To Make
Following your audit, you may be asked to pay fees, overdue or missed taxes, or other amounts to the IRS if there are any errors found on your return. It’s important to have a financial plan in place to work with these issues so you don’t become overwhelmed.
If you find yourself buried in tax debt, the IRS does offer programs such as extensions and monthly payments so that you can pay your debt in full. You can also request a settlement for less than you owe, but this generally requires certain conditions such as financial hardship for the taxpayer to be eligible.
5. Keep All Of Your Paperwork!
This is possibly the most important tip of all; keep your paperwork! Before, after, and during the audit, gather any relevant documents and file them accordingly. Be sure to file your audit papers with the corresponding year’s tax return and never throw tax information in the garbage. It’s best to keep financial paperwork for at least three years after you file, and for seven years if you filed a loss.
A tax audit doesn’t have to be frightening. As long as you’ve kept all of your records, reported all income, and used a professional tax service to file, you’re likely going to have a simple audit from which you will not owe any tax debt. Should you find yourself owing any debt, find yourself adequate representation, and ask the IRS about its repayment programs to lighten the financial load. Most of all, keep your records so you have them in case of future audits.
Being a senior business associate, Peter Davidson strives to help different brands and start ups to make efficient business decisions and plan effective business strategies. With years of rich domain expertise, he loves to share his views on the latest technologies and applications through his well researched content pieces.