Few things are as financially intimidating
as an IRS audit. As opposed to most other IRS actions against you, you don’t
necessarily need to do anything wrong to be audited. Tax evaders and model
citizens alike can become subject to scrutiny under the vigilant eye of an IRS
auditor. Although, responsibly handling your taxes considerably decreases your
chances of getting audited.
Still, there is a chance a small error,
miscalculation or misunderstanding leads to a closer look at your taxes. Even
something as benign as a large, uncharacteristic charitable donation may lead
to some questions. If you are about to experience an audit or if you are afraid
of what might happen if one occurs, there are a few things you should know.
Don’t
panic
Movies and television shows may depict
audits as frightening encounters with stern and humorless G-men, but for the
most part audits are rare and simple encounters. Although in-depth, probing
audits do occur they typically happen to those the IRS suspects of serious
white collar crime. There are three types of audits where the main difference
is your level of contact with the IRS: field, office and correspondence.
Field audits occur at your place of
business or your home, office audits are when you go to an IRS office, and correspondence
audits happen by mail. The one that an average taxpayer might experience is the
correspondence audit. These typically involve clarifying certain discrepancies
an IRS agent may have found on your return. Once any errors are cleared up, the
audit is over pretty quickly. Remember, the IRS’s main goal is to make sure
people are filing honest and accurate returns. As long as you are doing that,
any audit you might experience should be pretty simple.
Avoiding
Audits
Despite the rarity and simplicity of most
audits, uncomfortable examination of the finances of taxpayers does happen.
However, there are some simple practices you can adopt in order to limit your likelihood
of being targeted.
·
Don’t rush. Tax season can be a
nuisance, especially when piled on top of an already busy schedule. In today’s
fast paced lifestyle it can be easy to fall into the habit of rushing through
your taxes just to get them out of the way. However, a hasty look through your
taxes is likely to lead to mistakes and mistakes lead to audits.
·
Be honest. Report accurately all income,
deductions and any other numerical figure on your return.
·
Be aware of your tax bracket. The least
audited tax
brackets are right in the middle. If you are in the highest or lowest bracket,
you are at the greatest risk of being audited and, therefore, you should take
extra care when preparing and doing your taxes.
·
File electronically. E-filing is a great
way to manage your taxes. It is quicker for you to file and faster for the IRS
to process. Plus, the calculators and algorithms that crunch the numbers for
you significantly decrease your chances of making a math error.
·
Choose professionals wisely. If you choose
to use the services of a tax professional, make sure you are doing business
with a reputable source. For instance, Levy
& Associates is a tax consulting firm with an A+ Better Business Bureau
rating that has been around since the 1960’s.
An organization’s longevity
and good standings with trusted sources like the BBB can be indicative of honest
business. Also, check consumer reviews for the overall quality of their
service.
Handling
an Audit
If you do end up going through an audit
make sure you gather all the necessary documents and cooperate with the IRS for
a smooth and simple experience, and respond to the government’s attempts to
reach you immediately.
If you have the choice between going to
them and having them come to you, choose to visit the IRS office. This will show
your eagerness to cooperate, and it will limit your exposure to scrutiny. Before
you head into an audit review your rights
and what you will need, remember to stay calm and be polite. If you are an
upstanding taxpayer, you have no reason to fear and if you are rude you may
look guilty which may trigger further investigation.
About the Author - Lawrence Levy is the President and CEO of Levy
& Associates, a firm specializing in tax resolution and IRS
assistance.
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