If the IRS reviews your tax return and questions the credits, deductions, or exemptions you took, you may find yourself facing an audit. This is a stressful and frightening possibility for taxpayers who have never dealt with an audit in the past. Fortunately, knowing how best to respond to an audit can help improve the chances of a positive outcome.
Tips for Dealing With an IRS Audit
What should you do if you are facing an IRS audit? The following are nine important tips:
- If possible, postpone the audit. This will typically work to your advantage. For example, if you need additional time in order to gather all of your records, be sure to request it.
- Do not agree to hold the audit at your home or business. Generally, it is preferable to have the audit conducted at an IRS office. In the alternative, you can have your tax attorney handle the audit on your behalf. If the IRS is conducting a field audit to inspect your business income, it is important to consult with your attorney before agreeing to host.
- Prepare your records as completely as possible. In some cases, you may be missing receipts or other documents. Fortunately, you are allowed to reconstruct these records.
- Prepare to negotiate the tax issues with the auditor rather than focusing on trying to compromise about the amount of taxes that are owed.
- Do not unwittingly reveal too much information. Questions should be answered only when asked. Your goal should be to give the auditor only the information that he or she is entitled to. For example, do not give the auditor copies of other years’ tax returns unless specifically requested in the audit notice.
- Familiarize yourself with the tax legal issues you are currently facing.
- Understand your legal rights with regard to an IRS audit.
- Pay close attention to statutes of limitations. The IRS must complete its audit within three years from when the tax return is filed. The exception to this limitation is if the IRS finds tax fraud or significant underreporting of income.
- Consider an appeal if you are not happy with the results of the audit.
If you are facing an audit by the IRS, we strongly encourage you to contact us today at 800.721.7054 for assistance.