What To Do In Case Of A Tax Audit

Getting that dreaded letter from the IRS that you are being audited can be an intimidating experience, but it is essential that you remain calm and take the necessary steps to address the situation. Dealing with the IRS is not something that you should have to deal with very often in your life, but it will inevitably come up a couple of times. Here are some steps you can take to help navigate the audit process.

 

Understand Why You Are Being Audited 

The first step is to determine why the IRS is auditing you. The audit letter should provide information on the type of audit and the period being audited. The IRS selects tax returns for audit based on many different factors, including information reported on the return that does not match third-party data or that is inconsistent with industry norms or prior returns. Here are some common tax audit triggers that you should keep in mind:

1. Earning over $200,000 per year
2. Claiming large deductions or losses 
3. Not reporting or under-reporting income
4. Claiming large business expenses
5. Claiming the Earned Income Tax Credit
6. Claiming a home office
7. Reporting crypto or e-currency
8. Major changes in your reported income
9. Discrepancies with other filers

It is important to note that these factors do not necessarily mean that you will be audited. However, you can reduce the likelihood of being audited by accurately reporting all earned income, taking legitimate deductions that you fully qualify for, and maintaining detailed and accurate records.

 

Review Your Tax Return

Before you meet with the IRS or your trusted tax expert, make sure to review your tax returns not just for the last year, but for the last several years to ensure they are accurate and complete. Tax returns are complex documents that are easy to fill out incorrectly. While you may not have misrepresented anything on purpose, there is a chance that you filled out a blank wrong or mistyped while e-filing. Besides your actual tax returns, there are several other documents that might help move the process along. Try to gather and look over all relevant documents, such as receipts, invoices, and bank statements, that might support your claims.

 

Seek Professional Help

Consider consulting a tax professional, such as a trusted tax attorney who can act as a liaison between you and the IRS. Hiring a tax professional can greatly benefit you because they have years of experience dealing with intricate tax situations that the average taxpayer simply does not have. An experienced tax resolution attorney can help you understand the audit process from start to finish and help ensure that you are not paying more than you have to.

 

What is a Tax Resolution Attorney?

A tax resolution attorney is a legal professional who specializes in helping individuals, families, or businesses get to the bottom of their tax-related issues with the IRS. Because tax resolutions have gone through extensive licensing and continued education, tax resolution attorneys know more about tax law than anyone in the business. Additionally, the day-to-day experience that tax resolution attorneys have with handling IRS representatives helps them navigate even the most difficult cases with ease. 

These attorneys have a deep understanding of tax laws and regulations and are there to provide guidance and representation to clients facing any number of tax problems. This could include owing back taxes, facing an IRS audit, or dealing with a tax lien or levy. Tax resolution attorneys work to negotiate settlements or payment plans with the IRS on your behalf, and can also provide advice on tax planning strategies to help you avoid future tax problems.

Respond to the audit letter promptly 

It is crucial to respond to the audit letter within the specified timeframe. This is typically around 30 days, but make sure to double-check the letter for the exact date that you must reply by. Failure to do so can result in additional penalties and interest. Besides monetary penalties, failing to comply with the IRS and their timeline can result in the IRS taking a more aggressive approach in their follow-up. 

 

Attend the audit appointment 

If you are required to attend an audit appointment, the most important thing that you can do to help your case is to show up to the appointment on time and prepared. Since COVID-19 and all the changes that the world has seen, options for follow-up appointments may be scheduled either in person or via video conference. Regardless of how the meeting is to be held, attendance is crucial. Make sure to clear plenty of time from your day to ensure that you will not feel any additional stress due to time constraints. 

For this same reason, you should make sure to prepare all necessary documents well ahead of time. This will help speed the process along and help you feel more confident when you are being questioned about certain aspects of your tax return. If you do not have the necessary documents, request additional time to gather them by calling the phone number on your audit letter. 

It is also best to go into your appointment with the intention to be completely honest with your auditor. If you misreported any part of your tax returns, whether intentionally or unintentionally, going into your appointment as transparently as possible will go a long way with your IRS agent. Like law enforcement, the IRS agents working your case are only trying to do their job and ensure that certain laws and guidelines are being upheld. Compliance will make the whole process exponentially smoother than evading and lying during your audit interview. 

 

Keep good records 

While this is especially important if you are being audited, you should keep this bit of advice in mind for all annual reports. Keeping detailed records of everything coming in and out of your bank account is the best way to ensure that you are never accused of mishandling funds or underreporting income. 

If your household makes more than $200,000 per year, this is even more crucial. Individuals, families, and businesses in higher tax brackets are more likely to be audited, and, with more coming in and out of your account than most others, it can be difficult to track where everything is coming from. Make sure you keep good records of business expenses if you are self-employed or own a business, for all tax-related transactions. Keeping organized and accurate records can also help you avoid potential misfiling and tax problems in the future.

Understand your rights 

As a taxpayer, you have certain rights during the audit process, including the right to representation and the right to appeal the auditor’s findings. Understanding what you are legally entitled to throughout your auditing process can make a major difference in the outcome. 

If you are like most taxpayers and do not know much about your rights and responsibilities when the IRS gets involved, you might want to consider hiring a qualified tax professional to help you navigate the intricacies of being audited. Tax resolution attorneys, for example, have years worth of knowledge about the best way to go about protecting you and your family. 

 

What is an Audit Appeal?

Did you know that whatever decisions the IRS representatives in charge of your case come to is not set in stone? Like any legal case, you are entitled to appeal a case if you think the decision they arrived at was incorrect or unfair. 

Unfortunately, The IRS does not always tell taxpayers about their right to appeal adverse decisions. This is just another tactic they might employ to ensure that Uncle Sam is getting as much money back in his pocket as possible. If you do not know about this option early on, it can quickly become difficult to go through with your appeal. There are a number of forms and timing issues that make it far more complicated than it should be for someone without a representative to successfully appeal their case.

When working with a tax resolution, however, you will find that many of these hoops that you would normally have to jump through are taken care of ahead of time so that you do not have to. The sheer number of times that reputable, experienced tax specialists have gone through the appeals process makes them able to navigate the process effortlessly so that you do not have to struggle. 

 

Call Steven Klitzner Now!

Being audited by the IRS can be a stressful experience, but it is important to remain calm and take the necessary steps to address the situation before it is too late. By understanding audit rules and procedures, seeking professional advice, and keeping meticulous records, you can go into the auditing process with the best chance of a successful outcome possible. 

Still nervous about taking on the IRS alone? That is totally normal and many taxpayers going through this experience feel the same way. Hiring a trusted attorney to help you in your case can give you a much better chance for success. Steven Klitzner is one of the best tax resolution attorneys in the business and he can help you win your case. If you want to be sure that you are avoiding overpaying and unjust jail time, give attorney Steven Klitzner a call today and let him get you back on the road to tax compliance!