Being audited by the IRS for either an individual or corporate tax return can be an overwhelming and stressful experience. It can also cost you a lot of money if you do not handle it well and the IRS determines that your tax liability is greater than you initially calculated.
Fortunately, there are a lot of tricks to getting through an audit on top and succeeding in proving the accuracy of your initial return. By avoiding the following seven mistakes, you can maximize your chances of coming out of an audit without any negative financial consequences for yourself or your company
It's in your best interest when you're undergoing an audit to keep IRS representatives out of your home or office and to have the audit carried out at an IRS office. The type of audit where the IRS sends representatives out to your physical location is known as a field audit.
When you avoid field audits at your own location, you can choose the documents and the financial information the IRS will see. Discuss your audit with a tax professional who can represent you in your audit so that IRS communication will be sent directly to your representative and won't even come to your physical address.
Keeping track of receipts and other records that are pertinent to your tax returns is always important. However, it's especially important when you're being audited.
If you are missing records and you're being audited, don't immediately jump to the conclusion that the IRS is going to demand a lot more taxes from you.
It is often possible to reconstruct records. Nowadays, there are many online records of expenses paid such as bank statements or account records from your suppliers. Be resourceful, and you can probably come up with some backup records and receipts to support you in your audit.
You don't have to volunteer any information in an audit. The best policy is to cooperate fully and provide copies of any documents requested, but don't be overly talkative and don't give out any information unless you asked for it specifically.
You don't have to volunteer previous years' returns or any financial documents from previous years. You should never hand over any documents except those that were requested by the auditor.
Generally speaking, it's a good idea to take as much time as you can in going through an audit. Delaying is a good idea because it can often take some of the focus off of your particular case.
While you should stay inside any deadlines laid out by the IRS, you shouldn't rush things. Rushing things will increase the chances that you will make mistakes and might make it so that your audit is completed while your auditor is still looking at your case as a priority.
Any inaccurate information you present the IRS is likely to result in increased scrutiny of your return. Make sure that any information you present once the audit starts is entirely accurate and will stand up to thorough scrutiny.
You should be permitted to submit copies of documents rather than original documents. If you submit original documents to the IRS, you open yourself up to the possibility that the documents will become lost and you will not be able to replace them.
IRS audits can be tricky and complicated. It's never a good idea to attempt to represent yourself because you don't know the ins and outs of defending a tax return and communicating with the IRS.
Hire a tax professional to represent you and help you achieve the best possible outcome.
For IRS representation in an audit, contact Wright, Ward, Hatten & Guel. PLLC for expertise in dealing with IRS audits and tax discrepancy settlements.