You have just received notification that you are being audited by the IRS. Great, now the IRS will dig into your financial affairs. If you thought you had IRS Problems before, now you know you have.
Your first step is to read the notification. Find out exactly what the IRS wants, what year they audited, what types of audits they perform, and what documentation they will need for you to bring to the audit. Also, pay attention to the date you must reply to the IRS. You are usually given 30 days to respond.
Your number one goal during an audit is to provide only information relating to the particular year and the documentation being audited. You don’t want to reveal unnecessary details that would alert the IRS to investigate you further.
To help you support the information you provide on your tax return, you will need to collect the following documents for the year being audited:
o Bank statements
o Your canceled check
o Receipt for withholding claimed on tax return
o Profit and loss statement
o Verify payments for your mortgage, property taxes, donations, etc.
It may take you a while to gather all these documents especially if you have to request some of them from many different institutions so don’t wait until before the audit to start organizing.
During the audit, answer the auditor’s questions honestly but don’t talk too much. Auditors are aware that this can happen if you are nervous. Consider using the following statements when answering questions: Yes; Not; I do not remember; I have to check it out; What specifically would you like to see? and Why do you want to know?
Show only the documentation requested on the IRS notification. Don’t take anything else with you. If a question arises about a different tax year or about unsolicited documentation on an IRS notice, you can certify that this information is in your home.
If you agree with the audit results, pay additional taxes and consider your IRS Problem solved. If you do not agree with the results, you have the right to appeal.