We wouldn’t wish an audit on anyone. But if an audit comes calling on you, you should know what to do. Taking a few measures and steps will save you a myriad of headaches further on in the process.
- Get professional representation. If you’re selected for an audit, you’ll be notified by either phone or mail. The IRS will ask to schedule an interview. Even if you’re an accountant or CPA yourself, you’ll want to get a professional to handle the interview for you, because it will give you time to collect yourself and prepare. The IRS may give you some resistance, but know that if you sign over power of attorney, you’re perfectly within your rights to be represented by whomever you choose.
- Document everything. If you’re audited, you’ll find yourself wishing you’d been diligent with documentation. Having everything documented and organized will make your life much easier if you’re ever called upon for an audit. The IRS will want everything from mileage records to evidence related to money you’ve loaned to family members.
- Be honest. This goes without saying, but if you’re tempted to cheat on your taxes just keep in mind the nightmare that will result by trying to defend a dishonest return. Also, if your returns are squeaky clean, there’s a smaller chance that you’ll be audited because the IRS won’t have red flags alerting them to problems.
- Be precise. If you’re sloppy, an audit can be triggered by bad math or failing to report income that someone else reported. Be as accurate as possible, keep good records, and you’ll make your life easier.
- Don’t be a pain. An audit is a huge inconvenience at best. You’ll probably feel like the IRS isn’t polite, doesn’t value your time, and may even be out to get you. Whatever you do, don’t get an attitude with auditors. It won’t help you.
- Know your rights. You can appeal. If the IRS makes a determination you don’t agree with, you have several avenues to exhaust before accepting it. You can negotiate with the field agent, then appeal to a manager, then take it to the appellate level, and finally present your case at a tax court.
If you get audited, don’t panic. Take a deep breath and follow these measures to keep your stress to a minimum.