Adopt These Techniques for Surviving an IRS Audit

by | May 15, 2019 | Cracking the Tax Code with Christy | 0 comments

When the IRS notifies you of an upcoming audit, it can be a shocking, stressful ordeal. Although audits only happen to less than one percent of taxpayers across the U.S each year, many consider themselves to be the only victim, and understandably so. While there are multiple types of audits, such as a field office when an IRS agent comes to the place of business or a mail audit, which happens on paper, 9 out of 10 audits result in simple mathematical changes to the taxpayer’s audited return.

The IRS understands that audits can be taxing and sometimes costly. So the IRS set guidelines on how to best to survive an audit. Here we have the Ten Commandments for Surviving an Audit with the IRS.

1) Pay attention to IRS Notices!  First and foremost, do not ignore the notice that you’ve been selected to undergo an audit. Denying the inevitable won’t make it disappear. The IRS always gives taxpayers ample notice to prepare for such an audit, and if the notice is ignored, the IRS will continue to pursue the issue whether the taxpayer is prepared – or not.

2) Exercise your rights.  You might be shocked to hear this, but the IRS auditor who combs through every bit of paperwork in your life doesn’t have the final say as to whether you’re committing tax fraud. Should questions arise about the process, you do have the right to legal representation and the right to appeal the findings with the IRS Office of Appeals.

3) Tell the truth.  Never, ever, on fear of losing your personal assets or your business, lie to the IRS. Not only is this a crime punishable by federal law, but the IRS uses facts provided by the taxpayers themselves to defend its findings. Should you find yourself stressing about inadvertently harming your case by speaking to the IRS, seek legal representation to help guide you.

4) Always be prepared.  If you’re not prepared to undergo an audit, be prepared for a long, drawn out, potentially painful audit. Not having the proper paperwork and documents required by the IRS for the year(s) being audited can raise suspicions, causing the auditor to dive deeper into the past reported income and expenses.

5) Be tax-compliant.  Should you find yourself undergoing an audit, it’s IRS policy to ensure that the taxpayer in question has filed tax returns for the years in question. Not having properly filed documents when the auditor comes knocking on your door can only lead to more stress and intense questioning. The IRS auditor will can request up to six years of tax return history.  If you don’t have these returns filed, the auditor may decide to file them for you. In this case, you’ll be allowed no dependents, deductions, or tax credits on your return.

6) Get it in writing.  A general rule of thumb for audits is that all communication is to be requested in writing. Why is this? IRS auditors may mix up the case facts, especially if the taxpayer’s tax history is muddy. Any questionable information will make for a longer audit. Demand information requests and reply only in writing. That way, you’ll be covered from confusion and have a record of writing of the facts should you want to appeal the audit determination.

7) Communicate with the boss.  A taxpayer has the right to communicate with the tax auditor’s general manager if the case drags out too long, or is handled too far. Always be sure to get the auditor’s full name and contact information, as well as the manager’s, at the beginning of the audit. Also having the auditor’s contact information could be beneficial is penalties are assessed. As a taxpayer, you’re allowed to ask for a review of the audit.

8) Protect your pennies, and protest the penalties.  Taxpayers typically don’t argue with the IRS when it comes to penalties assessed to them or their businesses. However, auditors have a bad rap for overly assessing penalties. As a taxpayer, be prepared to review all of your audit facts and argue when you feel that penalties are unjust or shouldn’t apply to the year in question.

9) Calendars count.  Always, always, always remember tax due dates, audit dates, audit appointments, and deadlines for information to be submitted, including your response to the initial contact of the audit report, the deadline of Petition to the IRS Appeals court, and deadlines to petition Tax Court in defense of the findings in your audit. A face-to-face audit typically should be wrapped up within a year..

10) Practice financial self-defense.  Should you find yourself overwhelmed, unsure of the proper paperwork to submit, or simply feel it’s best to have the law on your side, find yourself legal representation. Tax lawyers are trained in dealing with IRS audits and can handle the majority of the audit for you, taking the stress off of your shoulders.

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