When it comes to filing taxes, an audit is arguably the worst-case scenario of the entire process. While there are ways to avoid getting audited, sometimes an audit is unavoidable. If you do find yourself on the receiving end of an IRS audit, consider these important steps:
Don’t panic! We know the word “audit” has the ability to cause most people’s stress level to rapidly rise. But if you filed your taxes honestly and accurately, the IRS may just have questions or want additional documentation to back up your return.
Collect and organize your paperwork. Organization is the key to success with audits. When the IRS requests explanations of certain documents, they typically want receipts, bills, cancelled checks, legal papers, loan agreements, mileage logs, expense reports, travel expenses, medical bills, employment documents, and investment statements.
Don’t miss notice deadlines. Each notice you get from the IRS will include a timeline for when they expect a reply. Be sure to respond by that date, if not sooner. An audit is a serious matter. If the outcome of the inquiry reveals you own money, missed deadlines means more money owed.
Three possible outcomes. After the IRS reviews all the additional paperwork submitted, there will be three possible outcomes.
No Changes Needed: Based on the documentation you provided, your tax return stands as originally submitted.
Make Necessary Changes: The IRS proposes modifications to your tax return, and you understand and agree with them.
Challenge Findings: The IRS proposes modifications, and you understand and you disagree with their findings. In this scenario, you have the right to request a meeting with an IRS manager, pursue mediation, or file an appeal.
Pay your bill ASAP. If the end of the audit or the appeal reveals you owe money, try to pay it as quickly as possible. After all, an outstanding balance accumulates penalties and interest.
Hire a professional. If the audit is in-person, consider hiring a tax professional to represent you. Better yet, give them power of attorney. That way you can avoid the meeting all together.
Whether you’re in need of someone to help you avoid making audit-worthy mistakes or to assist you in the event of an audit, Boris Benic and Associates can provide you with the expert tax audit help you need. Our tax specialists have the experience to guide you through any tax challenge.