Audits are unfamiliar territory for most taxpayers, even though many taxpayers get audited at least once in their life. It’s just one of those things most taxpayers don’t think about until it happens. It’s not helped because tax law is incredibly confusing and not easily accessible in plain language. If you’re facing an audit, chances are you have questions and want to know how you can prepare for an audit. Here are some things to expect if you’re facing an IRS audit.
Organize Your Records
Your files and documents will be critical in your audit. Your notice of audit will also contain the details of your audit – such as the years for which you’re being audited. As soon as you receive this notice, you should locate all the files relevant to your audit. It helps if you can systematically arrange them for easier reference later on. Make photocopies, especially of important documents – it’s not unusual for the IRS to lose some papers during a correspondence audit considering the amount of paperwork they have to sift through.
Good record keeping will be on your side throughout your audit. If you can’t locate your records, or if they’ve been destroyed, you can also reconstruct them. However, you will have to inform your examiner that the records you are presenting are reconstructions. Many people experience problems during their audits because of poor record-keeping.
Potential Audit Issues
That being said, you can’t really prevent problems from cropping up. Audits can be wildly unpredictable, considering the number of factors at play. For example, if you’re undergoing an office or field audit, you don’t have any control over who is assigned as your examiner. They might be suspicious of you despite your efforts, especially if your business is in a category frequently targeted for audit, (Take, for example, cannabis businesses because they operate in all-cash payments), or you utilized the earned income tax credit which is frequently targeted for audit. Problems can and will come up during the course of your audit. The important thing is to be able to face address those issues with thorough preparation.
Retaining an audit defense attorney can greatly help in identifying potential issues before the actual examination. An experienced tax attorney can identify potential problems with your return or recordkeeping and identify weaknesses that may arise during the audit.
“Winning” Your Audit
It helps to redefine what it means to “win” an IRS examination. Winning your audit doesn’t really mean getting more money at the end of your audit. In the case of IRS audits, winning can mean not being assessed additional taxes or paying less than what you expected to pay. Yes, your friend might have gotten money back when they were audited, but refunds are the exception and never the rule. The IRS is especially stringent with applying the Internal Revenue Code, which arguably is weighted against taxpayers in many situations.
When You Should Hire A Tax Attorney For Your Audit
As mentioned above, tax law isn’t really light reading. It’s long, convoluted, and confusing. In fact, even professionals who make a living out of it don’t fully grasp the entirety of tax laws – most tax professionals focus only on a specific branch and make it their specialty. There’s no way that you’ll be able to master tax law over the course of a few weeks while preparing for your audit. Yes, it might be possible to prepare really well for an audit, but it’s also important to know when to ask for help. Retaining the services of an audit defense lawyer who can represent your interests during an IRS examination can be a lifesaver. Tax professionals are also handy when the issues involved are complex or when they have possible civil penalties, such as when you’re being accused of fraud. Even a short consultation in which you have your audit questions answered can greatly enhance your preparation.
Sacramento tax relief attorney Jin Kim helps taxpayers under IRS examination navigate their audit and appeal unfavorable decisions. In addition, she helps taxpayers resolve tax debt through installment agreements, offers in compromise, and currently non-collectible status. To learn more about audit defense and tax relief, call her office at (916) 299-9913 for a free phone consultation.
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