It’s been a complicated year for taxes, especially with the IRS pushing back the deadline for filing due to the coronavirus pandemic. Even without these new complications, filing your taxes properly can be a challenge. There’s a reason taxes remain a stressor for American families each year.
After all, if you do your taxes incorrectly, you could get in trouble with the IRS. It’s not common to have to face an IRS audit but it does happen. If you’ve found yourself in this kind of trouble, you must consider your next actions carefully.
Approaching an IRS audit properly can make a big impact on the final result and the penalties you might face along the way. What do you need to do if you’ve received word of an audit? Read on and we’ll walk you through what you need to know.
Table of Contents
1. Read the IRS Correspondence Carefully
When the IRS does decide to reach out to you, it will likely be in written form. It will be a letter you receive in the mail (as opposed to a phone call or an e-mail or something like that). When you do get this letter, it’s important to read over everything with care.
The letter will discuss your tax return and will point out different instances that the government body has found to be confusing or in question. It will request documents to help clarify things. The request for these documents in and of itself is the audit.
Once you receive this letter, you will have thirty days to respond. It’s best not to delay: the longer you wait, the more interest and penalties can build up. Responding as quickly as possible can help to resolve this issue with little pain.
Make sure to read the letter carefully and make note of all the areas of your return that the IRS has pointed out. Make a copy of this letter for your records.
2. Consider Hiring a Tax Professional
We don’t have to tell you that taxes can be quite complicated. It can be almost overwhelming to have to handle an audit all on your own, especially if you have a lot of other things going on in your life. These other elements of life won’t go away just because you’re getting audited.
You have a right as a taxpayer to hire representation when an audit is called for. This is an enrolled agent or professional CPA who can help walk you through the process and work with the IRS on your behalf.
These professionals will likely have worked through many IRS audits in the past and thus, will know well how to proceed with your case. It can be invaluable to have someone with this kind of experience to rely on.
Not only will it take some of the pressure off of your shoulders, but it will also ensure you don’t make any further mistakes that can result in more fines, penalties, and problems.
You will need to file a form with the IRS informing them of the tax professional who will be representing you if you do hope to hire someone.
3. Gather Necessary Documents
It’s good practice to keep records of your expenses and spending year-round. It can come in handy for exactly this moment: when the IRS comes knocking. If you’ve kept copies of bills, receipts, and other such information, you should be in good shape to make it through your audit in one piece.
With these documents in hand, you should be able to prepare an overall summary of your income and expenses, at least as it pertains to the return that you submitted. All the bills and receipts you held onto will be attached as supporting evidence for this summary.
It’s when you’re missing certain supporting documents, things can get a little troublesome. You will then need to go on the hunt for duplicates. This often means reaching back out to the service provider or product sales entity and see if you can get another copy of a receipt.
Some entities will make it easier than others. Doctor’s offices, for example, should be able to get you a duplicate receipt with little trouble. Stores you visited on your travels, on the other hand, might have a more difficult time tracking things down.
There’s no need to go after receipts and documents that the IRS did not request in their correspondence. Make sure you’re providing them with copies, not the original materials as well. You’ll want to keep the the original materials for yourself in case you need them again.
4. Don’t Freak Out
Many people get anxious the moment an audit is brought up. However, an audit is not necessarily bad news. It just means that something flagged the attention of IRS. An audit can be requested for certain documents to be produced, and a return to be considered acceptable.
An audit does not always mean that more money will be owed. Even if you do end up owing money, IRS tax resolution can be pursued.
Keep this in mind when going through the process. Be confident. Answer the questions the IRS asks but don’t be a fountain of information, either. Remember to be courteous to your IRS agent and treat them with respect.
Remember that it will all be over soon.
Understanding the IRS Audit Process
No one likes hearing they’ve been selected for an IRS audit. However, an audit doesn’t have to be the end of the world either. The above steps can help you work through the process and keep your head on straight.
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