You filed an annual income tax return, only to find out some time later that you are being audited by the Internal Revenue Service. The prospect is daunting for many people, and understandably so. It is not the end of the world, though, especially if you are prepared.
The two most important preemptive actions you can take are entirely within your control: keep detailed tax records and supporting documents, and respond to any received IRS tax notice promptly and completely.
Well maintained records allow for quick, organized and accurate calculations, which are critical to your interests in an audit process. Keep in mind that an IRS audit can reach back years into the past, making quality record keeping vital for backing-up your past tax assertions. They can also serve as proof on disputed items.
If selected for an audit, it is highly recommended that you revisit your records and organize them appropriately.
A timely and complete response to IRS correspondence is always the best course of action, regardless of your particular circumstances. It not only alleviates potential penalties and interest fees, but it shows your willingness to cooperate.
Absolute compliance with an audit process is the best way to help yourself. It shows auditors that you have nothing to hide and that you are willing to make the situation right. Tax authorities, not unlike law enforcement, can show leniency when dealing with cooperative subjects.
Remember, cooperation does not mean you have to automatically accept the agency’s determinations. If an audit results in an increase to your tax liability, you are entitled to an appeal. You will typically receive documentation explaining any adjustments made to a tax return, and your right to meet with an appeals officer.
It is crucial to know your rights in regard to a tax audit, as it is long been noted that the power to tax is the power to destroy. Consider contacting qualified legal representation if you are heading into a dispute with the IRS. The stakes may be too high to proceed on your own.