While a majority of taxpayers do not get audited, every once in a while, the IRS will send you a notice that they need more information or that an error has been found on your return. Yet, there is also the possibility that you may need to prepare for a complete audit. By working with your tax professional or accountant, such as R&S Tax Service Inc in Folsom, CA, you can be ready for any of the questions the IRS may have as part of the audit process. However, this is dependent on a full audit versus a correspondence audit.
Working With a Professional
If you had your taxes prepared, then you will need to contact your tax professional to complete an IRS power of attorney. This will allow your tax preparer to contact the IRS in your behalf. You would want to limit your contact with the IRS in this case, so that you do not potentially complicate the situation. A tax professional is also versed in tax law. As a result, they will be in a better position to provide the necessary representation to address any tax code issues.
Some of IRS audits are simple correspondence audits, which would include a math error or other information that may disagree. These can typically be cleared up with just a few correspondences back and forth, along with providing information to clear up any discrepancies.
However, if you are called in for a full audit, then you will need to prepare information for your tax professional to prior to the audit. Here is where it is important to remember to keep good records throughout the year. By doing so, you will have the information necessary to provide to your tax professional.
Keep Good and Accurate Records
With the end of every year of tax filings, you should get into the habit of making a complete copy of your return and all backup for that year. Then if you are pulled for a previous tax year’s audit, you will have everything ready. Use a filing system that allows you to track the primary documents, such as receipts and original bills. Scanning all the back up and attaching it to the electronic copy of the tax return will help you to keep everything together. Then you can keep an electronic copy off the premises of your home.
Additional records to track are mileage logs, spreadsheets and any other summaries that may have contributed to your deductions. Keep your back up for the past three years, as well as the current year. Keep all tax returns for at least seven years.
Gathering Information
If your records are not complete, do the best you can to recreate those records that are being questioned as part of the audit. This can mean calling doctors’ offices to get copies of medical bills or other records, asking for duplicate W-2s or 1099 forms and even checking with your mortgage company to determine the amount of interest paid that year.
While it may take effort, the results can be worth it in terms of answering any questions the IRS may have about your return. Keep the format neat and summarized with any supporting documentation clearly labeled for your tax professional.
Understanding the Audit Process
By doing some homework, you can find out the type of questions the auditor may ask and therefore, you can prepare yourself in advance. The IRS also provides audit guides that may be posted on the website. With a better understanding of how the examiner will be working, you can reduce your anxiety level.
Additionally, you will want to be behave in a professional manner when you are dealing with or contacting the IRS. The reason is that your presentation can have a great effect on how the examiner treats you. Follow their instructions, be polite and on time. Make sure that you are organized and take your audit seriously.
After all, the examiner is not your friend. There is the assumption that you have done something wrong to be in the audit seat to begin with. So you will need to be forthcoming with information, but do not volunteer additional information. Instead, be confident and prepared to have the best outcome possible. In the future, it is best to consider hiring a tax professional to make sure that you have the best outcome possible.
