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An IRS audit isn’t a reason to panic but rather to plan

On Behalf of | Nov 17, 2019 | Tax Audits

Every year, no matter what else happens in your life, you will have to file your taxes with the federal government and the state government where you reside to verify that you have paid your income taxes in full. Some people may have to pay additional taxes, while others receive a refund for an over-payment throughout the year due to higher withholding than was necessary.

For most people, the hassle of filing a tax return is the worst stress that the Internal Revenue Service (IRS) will ever cause them. However, for a smaller subset of the population, the IRS will want to audit their financial records and verify if they owe more taxes or have manipulated the system by claiming deductions they shouldn’t have received.

Although the number of audits happening each year is on the decline, likely in part due to electronic filing options reducing errors, many people every year will face the stress and financial worry that comes with a review of their income and tax payments. If you have received an audit notice from the IRS, that doesn’t mean you need to panic or assume the worst. Instead, you need to start planning for success.

Get the support you need

Professional help is invaluable when facing an audit by the IRS. Ideally, if you are someone with a complex tax situation, such as sole ownership of a small business, you will be able to work with the person who filed your taxes while planning for the audit. It is possible that minor omissions or errors are what triggered the audit, so checking everything for accuracy can help you prepare for the audit itself.

Working with an attorney who has experience with the IRS and tax audits can also help you prepare. An attorney will know the potential risks and consequences involved, depending on the exact scenario that the IRS alleges in its letters to you. An attorney can also help you find an accountant or similar professional, if necessary, to organize your financial records and make them easily explainable in an audit scenario.

Start collecting financial records as soon as possible

Ideally, you will have a highly organized filing system for all of your major financial and tax records. In that situation, all you need to do to prepare for the audit is to make copies of the relevant documents and check your records for accuracy and thoroughness.

If you don’t keep records or don’t have them organized, you should start spending time now collecting records of your income, tax filings and major purchases and expenses. Documentation of any write-offs, including children and business expenses, will also help as you prepare for your audit. The sooner you start to take action, the more prepared and in control you will feel.