How to Prepare for a Tax Audit
Fear or panic might be your first response when you receive correspondence from the IRS. I know that’s how I’d react! But don’t let this initial panic and fear cause you to make mistakes.
Take a deep breath and calm your racing heart. There are steps you can take to help you prepare for a tax audit.
Request More Time
You’ll need time to gather documents at the very least, so requesting additional time is not unreasonable. In addition, it can give you the time you need to consult with your tax preparer and a tax lawyer if you need one.
Hire a Professional
If you hired a tax preparer to complete the documents in question, have them consult with the IRS about the audit. If possible, have them meet with the IRS and deal with the audit on your behalf. Meeting with the IRS on your own is not necessarily a good idea. You could innocently reveal information the IRS representative didn’t ask for. This could cause additional problems for yourself that may not have even existed when the auditor arrived.
Gather Records
First, it’s important keep your records up to date at all times. If you are ever audited, good record keeping makes gathering necessary supporting documentation much easier. You will be much less stressed if you are already partially prepared by having your filing and record keeping up to date.
If you haven’t kept the best records it’s going to be more challenging for you. But, if you have saved receipts and bills, you should be able to recreate what is needed. Additionally, if you are missing any bills, you might be able to contact the business who generated the bill in question and ask for another copy. With technology, you may also be able to easily pull some of your bills from online accounts too.
Do Your Research
Do you know anyone who has been through a tax audit? If so, talk to them to find out what it was like and what questions the IRS representative asked. This will help you be better prepared for your own audit.
In addition, you can go to the IRS website itself and read up on topics such as your rights and how to respond to an IRS audit notice. You can also find information about how some criminals pose as IRS representatives to steal your information. This way you can avoid being scammed by these criminals.
Don’t Volunteer Information
If you are unfortunate enough to be the one dealing directly with the auditor instead of a hired tax preparer, do not speak to the representative unless you are asked for something. Whenever possible, do not allow the IRS to conduct the audit at your home or place of business. Do not provide any documents not asked for. However, it is best to provide whatever they do ask for as quickly and respectfully as possible.
In the future, if you do receive a notification that the IRS will be examining your tax records, you now know how to prepare for a tax audit. Knowing what to do should help you remain calm and get through it, after your initial freak out of course. 🙂
Have you ever been through a tax audit? How did it turn out?
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I haven’t been through a tax audit as my most taxes are taken care of by my employer, but it’s good thing to know how I can handle it myself. Thanks for the tips Kayla.
“Don’t volunteer information.” That is one of the best suggestions in the article. As a former 22+ year employee of the IRS I can verify that one thing auditors do is simply listen. They learn all kinds of information by listening to the taxpayer just ramble on talking to the accountant or the auditor, nervously trying to fill “dead air” by having a conversation. Don’t! The best thing is to answer questions briefly and accurately, then keep their mouth shut.
I’ve never been through an IRS audit, but I did go through a few bank audits when I still worked at a bank for my full-time job. I definitely learned to not offer extra information! 🙂