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There are many things most of us wish to never experience in life. An audit is certainly on that list and, for many, probably somewhere toward the top. The entire point of doing taxes is to do them correctly; you want to pay the government what you owe and report the correct information to avoid IRS trouble. This why keeping your accounting flawless is paramount, as a single mistake could render your tax return flagged.
With that being said, there are many reasons that the IRS could decide to audit you and, in some cases, it’s due to a mistake on their end. Read on to learn what to do when you get audited.
Take A Breath
While this piece of advice might seem obvious, it’s the only start to handling a stressful situation. An audit is not the end of your life, nor does it need to be the end of your bank account. In many cases, an audit is rectified by simply providing a correction or an amended tax return. If you did not intentionally withhold information from the IRS and provided accurate records, then the outcome of the situation is typically less drastic than the word ‘audit’ presumes. If you’re feeling overwhelmed, try to adopt a healthy thought process that will help you manage the stress.
It’s Time for a Tax Professional
Today, companies spanning across a large swath of industries push consumers to DIY (do it yourself). Nearly everything in this day an age, with a couple YouTube tutorials and some diligence, can be done yourself. Doing your taxes certainly falls into this category. Unfortunately, handling an audit does not. Furthermore, it could’ve been the DIY method that landed you in the hot seat. Now that this situation is upon you, it’s imperative that you consider an IRS fresh start program with a talented, knowledgeable, and diligent CPA. Hiring a CPA can be the difference between having your assets levied and resolving an audit amicably.
Dissect the Notice Meticulously
You’ll want to read the information carefully to, at the very least, decide whether you find the information to be true or not. This will then help you identify which kind of audit the IRS is rolling out. From correspondence, office, field, to alternate programs, there exists a large array of methods the IRS can execute their audit. These are typically indicative of the severity of the case. There’s a stark difference between the IRS asking you to provide some additional information in the mail, versus them sending a field agent to sit down with you in your office. If you decide to respond to the audit notice on your own, be sure to draft an appropriate response.
Gather Your Documents
When dealing with an audit, you will need to stay organized. You don’t want to lose documents or misplace information that could help rectify or at least mitigate the problem. You’ll want to produce every material you can find—particularly if it proves what you stated on your tax return. Again, this correlates with our second tip (hire a tax professional). You’re going to want to someone in the drivers seat who has experience handling an audit, as they will have protocols in place for organizing information. If you’ve decided to DIY, try to integrate software or a platform that can help you manage the heaps of information you’ll have to produce for the IRS.
Hold Your Tongue
Let’s face it: the IRS is talented. They’re dexterous in keeping people accountable, managing unbelievable amounts of traffic, and getting what’s owed to them. One of the tactics they frequently use to manipulate taxpayers is fear. They will use language that evokes panic from the delinquent or under-the-gun taxpayer and then try to force information out that they wouldn’t otherwise be able to obtain.
It’s important that if you’ve decided to DIY, you need to be extremely careful about the information you provide to them. No matter what prompted this audit, providing incorrect information in response to an audit can land you in serious trouble. Just as well, you may give them insight into information they can use against you. But if you comply to the best of your abilities, an audit should just be a small blip on your radar.