What to do in Case of an IRS Audit

Taxes - Consultants & Representatives

Receiving a letter from the IRS can almost get you frozen in your tracks. All along, you may have toyed with the idea of what to do in case of an IRS audit. As you are going to realize, there is no need for panic. All you need to do is to abide by the instructions on that letter. On the other hand, you should be prepared to go through the process with an IRS auditor. So long as you know that you can back your tax returns with some proof, there is need for concern. You are supposed to cooperate with the IRS in such matters. Here is what to do in case of an IRS audit:

  • Stay calm: It is a common occurrence for most people to start panicking as a result of such a notification. Do not ignore such a letter. Normally, the IRS computers pick tax payers details at random. The system is set in such a way that any tax returns which look like they do not have sufficient back up stand to be picked up for scrutiny. Prepare a file with all the documents you used in filling your tax return forms. When the IRS auditor shows up, you can pull them out for his/her scrutiny.
  • Avoid being defensive: When the IRS picks on you, it does not necessarily mean that you did something wrong. IRS computers may detect anomalies between the information provided by employers or banks and what you indicated when filing. It is very normal to get under such scrutiny. You are called upon to be optimistic. At the end of the audit, you may end up not paying any additional tax. You could even be eligible for a refund.
  • Records: The essence of every accusation lies in providing proof to back your side of the story. The same applies when the IRS picks on you. Once you have gotten out of the initial shock and amazement, go through the letter slowly. Note the areas where your attention has been directed at. In a systematic fashion, gather all records that you will use to support what you indicated in your tax return forms. Make some copies such that if the auditor requests for any documentation you will still be left with the originals intact. The only original documents you can surrender to the IRS auditor are form 1099 and W-2.
  • Harassment: You have only been chosen at random by the computers at IRS. That does not mean that you are under arrest or are suspected of fraud or any criminal activity. Therefore, no auditor has the right to harass or be rude to you. If you get a visit from such a person, call the IRS office and lodge your complaint or concern. You may even be assigned another auditor who can exercise professionalism and decorum.
  • Relevance: If you have ever been a witness to a case in a court of law, your advocate may have told you to avoid giving information that has not been asked for. The same applies with the IRS audit. Stick to the areas mentioned. Do not bring about additional records or discuss information that has not been requested for. This way, the exercise will have focus and come to an end within a few days. Talking about unrelated issues will often lead to complications. Avoid that.
  • Act professionally: Some people treat IRS agents rudely and become uncooperative. Just be courteous and respectful. It could make a lot of difference.

Now you know what to do in case of an IRS audit. Stay calm, work with the auditor and it will be over before you know it.