08 Sep Preparing For An IRS Tax Audit
Being the focus of an IRS tax audit is becoming less and less common. Contributing to that are new, increased responsibilities and budget cuts on the department. This means that there aren’t as many IRS agents around to do examinations as there were before. Regardless, no one wants to hear the words “tax audit”. But if you’re prepared, there’s nothing to worry about… if you’re prepared.
The first step is to find out why you, of all people, is being audited. It doesn’t necessarily mean that there was a tax return related error. Various methods of choosing who will be audited consist of the following:
- Related Returns or Partner Returns
- Mismatched Documents
- Randomly Chosen “Lucky” Individuals
Facing an Audit? What Kind?
The IRS regularly performs three basic kinds of audits. Some are less painful than others. The first thing that will happen is that you will receive a letter from the IRS. The particular audit that you are scheduled for will be mentioned in the letter. It could consist of one of these:
- Form 4564 – Field Audit
- Form 3572 – In-Office Audit
- Form 566 CG – Correspondence Audit
What Are My Legal Requirements?
When it comes to the retention of your business and personal financial records, there are numerous laws that you should beware of. Here’s a couple of examples:
- For at least six years, for all personnel, payroll records need to be kept. They also need to be kept for the current year.
- You should keep, for as long as the asset is kept, all business records that pertain to that specific asset… Then you need to keep them for three more years.
Ordinarily, the IRS will probably just look at the last three years if they decide to an audit. They can, if they find an error, include more years. For the most part, they won’t go back any more than six years.
Get Your Documentation Together
Okay. You know what kind of audit is going to be done, so now you can get start gathering your documents together. The best way of having all needed documentation at your fingertips is to, far ahead of time, keep all your documents in an organized, clean manner. This is something that should be done all year long. Files should be kept for every year. Accompanying the information in that file should be a copy of your IRS submitted form and any 1099s or W-2s that apply to that specific year.
Being highly organized can lead to a far quicker examination.
Not So Good At Preparation?
If you don’t feel like you’re ready and the audit date is getting closer and closer, you can submit a request for additional time. In your notification letter, there was a number provided at which you can contact your auditor directly. Tell them why your appointment needs to be postponed. Usually, they’re happy to work with you.
If you still, after all of this, feel incredibly wary about the prospect of an IRS audit, feel free to consult with tax help professional. These individuals deal with the IRS on a regular basis and are far less intimidated. They also know all of the ins and outs of taxes, forms, records, laws, regulations, etc. If you feel in the least bit uncomfortable, don’t do it yourself. You don’t have to face this alone.
If you are experiencing tax issues, contact the knowledgeable experts at Tax Defense Partners. With over 1000 successfully completed cases, we have been featured on KFI Radio (AM 640), The Shawn Hannity Show, the Rush Limbaugh Show, in Forbes, and more. Our team of certified professionals would be happy to assist you with all of your tax problems. Don’t wait until the last minute to schedule a free consultation. But don’t believe us! Click here to see, for yourself, some of our most successful endeavors.