Some Tips on How to Prepare for an Audit
What’s the worst thing that can happen to you at tax time? Maybe you’re expecting a big tax return but after crunching all the numbers and entering all the necessary information you end up owing a big chunk of money to the IRS. That is definitely a lousy outcome. Perhaps you are due a big return but it ends up getting lost or delayed for weeks, or even months, until the IRS finally figures it out and sends you a return. That is no fun either. Having you identity stolen could be one of the worst results of tax season as well. However, perhaps the most likely answer taxpayers would give to this question is to be audited by the IRS. Few things can cause as much fear and anxiety as being selected for an audit.
I have a good friend that was chosen for an audit several years ago. He and his wife paid all their taxes and they certainly weren’t trying to hide anything from the IRS. There were no hidden offshore accounts and their income wasn’t even in the six figures. The only thing they were guilty of was being too giving. The IRS took issue with the amount of money they were claiming in charitable donations. Apparently the IRS thought the amount they reportedly gave to their church was too much for their income level so it triggered an audit. I remember talking to my friends about the ordeal as they shared the sheer terror that they felt. Needless to say they were stressed out and the pressure of the situation really weighed them down.
Be Prepared, Not Afraid
However, this story had a happy ending, because my friend and his wife were prepared. They had detailed records of all their donations, their receipts, their checks and everything else the IRS wanted. Because they still possessed those records and they had done nothing wrong, the audit went well and they were exonerated of any wrongdoing. The moral of the story is to be prepared. No one wants to be chosen for an audit, but if you have nothing to hide and you have kept detailed records then an audit doesn’t have to bring you down to the depths of fear and anxiety. So then, what if you are chosen for a tax audit; what should you do to get prepared so it can be as stress-free as possible?
Seek Professional Help
One option is to immediately seek the help of a good tax attorney or an experienced accountant. You can turn everything over to a professional and let them handle it for you. This not only helps ensure that the process is handled correctly, but it can also help relieve you of a lot of unnecessary stress. In the event that you would rather not seek professional help there are some steps you need to take in order to be prepared. Remember, preparation is the key to successfully navigate through any tax audit.
As I mentioned, my friend and his wife were able to get through their audit because they were prepared. The first thing you should do is keep good records. If you haven’t kept detailed records then you will need to do whatever it takes to collect, gather and organize your records. Remember though; only give the IRS exactly what they ask for. Don’t give the agency any additional info, which could trigger an even deeper look into your financial records. Go ahead and gather any records you can get your hands on, including all bills and receipts, in the event they end up asking for more. By having that information ready you can help expedite the process, but only offer up what they ask for. Make sure you also track all of your expenses, interest payments, donations and any other tax records that could be relevant and hold on to that information.
Know Before You Go
It is also a good idea to do your homework. In other words, research everything you can about the audit process and talk with others who have already been through the experience. This can also better prepare you because you will have a greater understanding of some of the questions the IRS might ask you, and how you should answer them. Also, keep in mind that your behavior is an important part of the process. Be professional, polite and prompt and do your best to stay calm and collected. Lastly, remember that the auditor is there to do a job. Although you are innocent until proven guilty, the IRS already suspects that you have done something wrong. Be respectful and cooperate with the process but don’t volunteer more information than necessary.
You Can Get Through This
While a tax audit can certainly be stressful, it doesn’t have to add 10 years to your life. By following these simple tips you can be fully prepared for an IRS audit and you can come out on top, as long as you have filed your return correctly and you have the records to prove it. So if “that” letter does ever arrive in your mailbox, don’t panic. With the right preparation you can survive an audit.