Docstoc

How to Survive an IRS Audit

Document Sample
How to Survive an IRS Audit Powered By Docstoc
					HOW TO SURVIVE
                    AN IRS AUDIT

How to Survive an IRS Audit


The vast majority of us get through our tax return without any major problems. Most
of us figure the IRS has bigger fish to fry. You would be right most of the time; the
odds of the average person being audited are quite slim in any given year. But as the
saying goes, it's best to hope for the best but be prepared for the worst.


Let's looks a few things you can do to be well-prepared in case you're chosen for an
audit.


Before You Get Audited


   1. Keep good records.If you're not organized, now is the time to start. Keep at
      least 3 years of tax returns and all the associated documents, bills, receipts, and
      other items as appropriate. This would include any items related to your
      income, investments, or tax deductions.

           If the IRS disputes any of your figures, you'll have to have the documentation
           to back them up. If you don’t have the documentation for a deduction, for
           example, they may disallow that deduction altogether.



           Organization is an ongoing process. Take care of your records daily, as you
           accrue them, rather than just once a year.



   2. Watch your red flags. Here are 5 of the things the IRS tends to look for when
      choosing tax returns to audit:

           Large business expenses.Small business owners sometimes try to get
           away with deducting nearly every expense they have. The IRS knows this.



                                         1
           Be careful.



           Your "friends."If you're trying to pull a fast one, it's not uncommon for the
           IRS to get a tip from a friend, family member, or co-worker. The solution is
           to not do anything wrong in the first place. In lieu of that, don't tell anyone
           anything that can come back to haunt you.



           Complexity.If you're business or investment transactions are very
           complex, the IRS might believe that it's likely you made a mistake
           somewhere.



           Large Charitable Deductions.If you give significantly more to charity than
           others in a similar financial situation, the IRS will take pause. Also, if your
           charitable donations increase dramatically, the IRS will be curious.



           Inaccuracies on your W-2 or 1099.They figure if the basic documentation
           is wrong, there must be other things wrong as well.


   3. Be prepared.In the event that you are chosen for an audit, you should
      immediately prepare yourself. Review your tax return and associated records.
      Don't hesitate to get expert advice if you need it; a CPA can provide valuable
      insight and information.


During the Audit


At the time of the audit, do not volunteer more records than the auditor requests. Extra
records will never help you, but do provide the opportunity for the auditor to find
something else wrong.


Keep the auditor honest. They can only request information and records related to
the official request that you received in the audit notification. If they stray from that,
don't be afraid to politely tell them 'no'. They have the option of filing a second


                                          2
                                   official request, but many won't bother and will simply let it go.



                                   While the odds of being audited are generally quite small, it is unlikely that you’ll exit
                                   an audit without paying some additional tax or penalty. The IRS wants to generate as
                                   much income as it can.


                                   However, having the proper documentation for every item on your return lessens the
                                   probability that you’ll have to pay. So regardless of which item they question, you
                                   have the paperwork to back up what you claimed on the return.

                                   Provided you haven't intentionally done anything wrong, there is usually nothing
                                   significant to worry about. The key is to be honest when filing your taxes and keep your
                                   records up to date. If you do these things, you will survive an IRS audit.




                                                                             3



Powered by TCPDF (www.tcpdf.org)
Curtis Rose is an experienced professional with extensive experience in all
aspects of personal finance. Curtis writes and publishes articles, courses,
guides and special reports on his personal finance blog. Sign up for his
monthly personal finance newsletter and receive tons of free information
that you can use to help you reach financial freedom.

               http://www.PersonalFinanceDashboard.com

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:25
posted:9/23/2012
language:English
pages:4