Just the idea of being audited by the IRS strikes fear into the hearts of most small business owners. Some peace of mind should be found in the fact that audits are pretty rare for one simple reason: money. The IRS doesn’t have the budget to audit everyone and less than one percent of returns get flagged for an audit. If yours does, however, here are some tips from Cheryl Jefferson & Associates on how to survive an audit.
Don’t Ignore the Notice
It’s tempting to ignore anything that is scary or uncomfortable. That would be a mistake with an audit notice. Your audit notice will typically have a time frame on the letter in which you have to reply to a notice of audit. If you fail to do so, the IRS can take action against you such as garnishment of wages and account freezing.. When you receive a notice, this should become a priority.
Follow the Directions
Read the letter that you receive from the IRS several times and ask your accountant to interpret it for you. Although the IRS has taken steps to make their letters less confusing, this is still tax code that you are trying to decipher.. First, determine what sort of audit you are being subjected to. Most audits are correspondence audits. This means that everything will be done through the mail. The audit notice will provide you with the year of the return and the item(s) being scrutinized.
It is your responsibility to prove any deductions or other items being looked at on the audit. The more organized your records are, the easier the auditor can find the documentation needed to support the items under audit.. Tossing a shoebox full of jumbled receipts in the mail isn’t going to cut it. If you find that some records are missing or incomplete, now is the time to do your best to reconstruct those. Call whoever you need to ask for duplicates. If you don’t have documentation for the expenses, the deductions will be denied.
Provide Only What is Asked
Don’t offer more information than what is asked either in an effort to be helpful or to bombard the auditor with information overload. Both tactics can backfire. If you provide additional years’ tax returns, you could be opening yourself up to adjustments in those years as well. Provide the auditor only the documentation for the adjustments listed on the audit and nothing more. Never send originals to the IRS; only copies! If they wish to look at something else later on, they can ask you for the information and give you time to prepare for it.
Tax audits can become complicated affairs very quickly and it is always important that you know your rights. As the U.S. tax code isn’t light reading, getting help is recommended when you are faced with an audit. An audit by nature is an adversarial exercise, and it’s always best to have someone on your side who is an expert. Your best alternative is to find a qualified and experienced tax professional, like Cheryl Jefferson & Associates, that can look into your case and represent you in an audit. so that you have the best possible outcome. Contact us today to schedule your free half-hour consultation!