Have you received notice of an impending tax audit for you or your business? Take steps to prepare, to minimize the stress and anxiety of the audit process. tax resolution
If you find out that the IRS has chosen your tax return to be audited, your first instinct might be to panic. However, with careful preparation and the help of an experienced tax resolution professional, you can emerge from your IRS audit with the best possible results. In general, it’s not a great idea to handle audit proceedings yourself because you might not be aware of everything the IRS needs to examine-and you might give away more information than is necessary, opening yourself up to further scrutiny. Once you’ve brought in an expert to guide you through the process, you’ll have the confidence that each step you take is leading toward the possibility of a better audit result.
Determine the Reason for the Audit
One of the first things your tax consultant will do upon accepting you as a client is attempt to determine why your return is being audited. It is possible that you were selected at random, but there’s also a good chance that something in your return raised a red flag with the IRS. Your tax consultant will go through your return with a fine-toothed comb looking for bookkeeping errors, filing mistakes, and other issues. Other red flags include questionable deductions, excessive deductions, and large business expenses. Once your tax professional has located potential causes for the audit, he can more accurately and efficiently prepare you for the proceedings.
Gather Backup Materials
If your return is being audited, you’ll need to gather every bit of paperwork you have related to your taxes, particularly income, expenses, and deductions. For instance, if charitable deductions are the culprit, you’ll need receipts from all of the charities to which you donated to prove that you gave as much as you’re claiming. Your tax pro will be able to advise you on what paperwork is needed-as well as what, if anything, not to show.
Meet All IRS Deadlines
The IRS is serious about its deadlines, so if you’re given dates in your notice, make sure you comply. You may need to confirm response of the IRS audit notice, schedule your audit proceedings by a certain date, and file related paperwork. Note important dates in your calendar, and as you gather materials, find the most timely items first. While your tax resolution expert can help you with this step, it’s also up to you to know when deadlines are looming and to be prepared for them.
Learn About Tax Penalties and Settlements
After he’s spent some time with your case, your tax advocate will probably have an idea of whether the audit is likely to go your way. At this point, it’s a good idea to ask about the various tax penalties to which you might be subjected. You may be hit with fees related to underpayment, especially if the auditor finds that you willfully committed fraud. You may also have interest charged on the balance you underpaid. Knowing beforehand what tax penalties might apply to your situation can help you prepare financially. You can also research tax settlements related to the penalties you’ll incur to speed up the settlement negotiation process.
The best way to be prepared for a tax audit is to be organized-and in best-case scenarios, that starts long before you receive the audit notice. Keep detailed records related to each year’s tax return, so that materials are easily accessible when you need them. If you already use tax consultants for tax preparation service, ask about potential audit red flags when you file. Meanwhile, if the audit is your first sign that you need to improve your tax organization and record keeping, make changes going forward to avoid future issues. After all, one IRS audit is more than enough for anyone.