Accounting News

Tuesday, July 24, 2012
How To Handle an IRS Audit

No one wants to get the dreaded notice from the IRS that you are being audited. But it happens to many people every year. The larger your income the more likely the notice but the IRS does target all income brackets. Here are some basic steps you can take to get through it and keep your sanity.

  1. Don't throw it out. It is amazing how many people think that if they just throw the notice away the IRS will forget about them and go away. I can tell you from experience that this never works. Take the time to read it again and pay attention to the year(s) in question. Some times it is a simple question that can be answered quickly with the right documentation.
  2. Contact an expert. Everyone is an expert in something. But if tax law isn't your field then it is wise to work with someone who is. A tax accountant can offer advice and even represent you to the IRS. Years of experience are always a benefit when dealing with a bureaucratic process like an audit. They know all the short cuts to get to the finish line.
  3. Get everything together. Now collect all the backup that you and your account decide you need. Have it all organized so you are not wasting the auditors time or making it more difficult than it needs to be. Don't take in more than you need. You never want to expand the scope of the audit by showing backup that is not required. 
  4. Be honest. If you made a mistake then be upfront about it. Work for a good settlement. It is a crime to lie to an auditor and they are experts in finding out the truth. It is always good to bring your accountant with you for help and support.
  5. Be friendly. It never helps to be confrontational to the auditor. They have the power to make it a very painful process. Most are reasonable but not all. Just keep your cool and don't take anything personally. They are trying to do the best job they can even if it is a pain to you.
  6. Keep originals. Don't give your originals the the IRS. Make copies for them so you can make more copies in the future if needed. Telling a second auditor that the first one lost the originals just doesn't work.
  7. Be informed. There is no requirement that you accept the auditors settlement. You can always go to the Appeals Division or even tax court if you don't feel you are being treated fairly.

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