Getting that dreaded letter from the IRS letting you know you're being audited doesn't have to strike fear into your heart. By being proactive and taking the appropriate actions, you will be able to smoothly navigate the audit process and come through with your finances and your sanity intact. Follow these four tips for surviving a tax audit:
Hire a Professional
There is no reason to handle this on your own. Taxes are complicated and audits in particular can quickly become time-consuming and confusing to manage without professional assistance. An experienced tax service or accountant will be able to quickly determine what exactly the IRS wants from you, and will handle most of the audit process for you, ensuring paperwork is accurate and on time.
Don't Take it Personally
Many tax audits are completely random: the IRS's computer system simply screened taxpayers at random and selected you using an algorithm. In other cases, you may have been audited deliberately due to something simple and relatively benign, like your reported income not exactly matching the W-9s and other income reporting forms the IRS received from your job(s). If you take the audit personally, you will quickly become anxious and paranoid, inflicting unnecessary stress on yourself.
Gather Receipts and Other Documentation
Your tax accountant will help you determine exactly what documentation the IRS is asking for. In many cases, you will only need to provide a few items, while a more comprehensive audit may require a significant amount of paperwork from the year in question.
Gather all paper and electronic receipts and income documentation you have that matches what the IRS is asking for. If you tossed the documentation in question, you may need to do some serious legwork, including asking your employer for a copy of your pay stubs or asking your bank for old bank statements.
Make a Plan for Going Forward
While you can't go back in time and be more organized in the past, it's important to keep an audit trail moving forward. An audit trail simply means tracking your income, exemptions, and business expenses (ideally in a well-organized spreadsheet) and keeping copies of all documentation. This way, if you are audited again in the future you will be able to simply hand over your well-organized paperwork to your accountant, without any major hassle.
By following these steps, even a scary tax audit will be a relative piece of cake. Contact a company like RJ. Garner CPA & Associates, PLC for more information.