It’s tax season and one of the most grueling things that could happen to you this season would be to receive a letter in the mail about an IRS audit. On the bright side of things, only about 1 percent of taxpayers are audited. This is usually because Schedule C filers with a side business have reported large losses, or Schedule A filers reported a sizeable charitable contribution. If you don’t fall into these categories, then it is a pretty good chance that you won’t be part of the 1 percent that gets an IRS audit.
These aren’t the only reasons you may be audited, but they certainly raise questions with the IRS.
If you do end up being a part of the 1 percent that gets an IRS audit, then here are five stress-free ways that you can deal with the audit.
1. Respond to the request.
One of the first things to do when you receive an IRS audit is to acknowledge it. Many of the problems that arise with audits come from filers who do not respond to the request within 30 days. If you don’t respond, IRS can take action without your input, and they can bill you for the amount that they believe you owe. Respond to the audit by accepting responsibility and prepare your case. After all, they are a large government entity, and there is a good chance that this could be an error. If you have you’re your records in order, then gather what is needed to address the parts of your tax returns being audited.
2. Get your records in order.
If you haven’t already, take time this year to get your tax returns from the past three years in order. Legally, the IRS can audit your taxes three years back unless there is a substantial error or suspected fraudulent activity. In such cases, IRS may be able to review your taxes as far back as you have filed. Instead of panicking, do an audit on yourself for the past three years to ensure that you are prepared to deal with an audit should it arise. Make sure that you have your receipts and other proof, especially for huge deductions or charitable donations.
3. Only provide what it asked for.
Sometimes out of fear, filers may resort to presenting more than what is asked for by the IRS. This may seem like a noble thing to do, but legally, you are only obligated to give the IRS auditor what they are asking for within the years that they have requested. As a taxpayer, there is a Taxpayer Bill of Rights that protects you. It would help if you familiarized yourself with it before the IRS audit.
4. Get professional help.
When it comes to receiving an IRS audit, keep in mind that you don’t have to handle this alone. There are tax professionals and tax attorneys that can assist you with this matter. Some more well-known tax agencies will provide audit services for you should you get audited. It usually is included as an additional fee with your tax preparation services. Another professional that can help you with an audit is a certified professional accountant (CPA). They are very knowledgeable about tax-related issues. Moreover, if you solicit their help before filing your taxes, they can minimize errors that may cause the IRS to initiate an audit.
5. Appeal, Appeal, Appeal.
No one likes litigation, not even IRS agents. However, sometimes it may be necessary to refute an audit in the court of law. Going to court is usually in extreme measure, but it does happen. Before taking your case to court, you may be able to appeal the decision through an internal channel provided by the IRS called the IRS Office of Appeals. Although the office is associated with the IRS, it is an independent and impartial body that helps clients resolve their tax issues without litigation. If you are unable to reach an equitable outcome with the IRS Office of Appeals, then they will direct your case to the U.S. tax court.
Tax audits can put you on edge for a variety of reasons. One reason is that you don’t know the outcome of the matter. Another reason is it’s a scary process in general. If you remain organized and calmly approach the audit, it may not turn out as bad as you expect. Also, suppose you feel that you can’t handle the enormity of the task at hand. In that case, you can always rely on professionals to assist with an audit, particularly a CPA. Even if you don’t win, there is still an option to appeal. An IRS audit may be terrifying, but if you do these five easy things to prepare, you won’t rack up many sleepless nights stressing about this issue.
Tax Resolution Law Firm Detroit has been helping clients with tax disputes and issues for more than 20 years. If you are facing a tax audit you have the right to legal representation and our Tax Resolution Attorneys are experienced in all matters involving tax resolution, tax dispute, and general concerns relating to IRS tax and debt relief.
Don’t go through an audit or tax dispute alone. Contact our Tax Law Office for assistance with your audit. Our tax attorney can help you prepare and represent you through the process with peace of mind.