For many taxpayers, the idea of an audit is cataclysmic. Nothing else strikes such fear into the heart of the average taxpayer. You might be conjuring up images of men in suits ready to put you in cuffs and haul you away for fraudulent returns, but you’re most likely worrying too much. While a tax audit is a serious situation, there are many things you can do to prepare yourself for the event and defend yourself against the IRS. If you’ve been honest and accurate in filing your taxes, then you shouldn’t have to worry at all. Whatever your case may be, start preparing as quickly as possible to get through your audit successfully.
First of all, you need to understand that audits are not sent out instantaneously. In most cases, there will be a significant delay in between your filing and your audit–often, a delay of several years. There is a general statute of limitations of three years for tax audits, but this can be extended under certain circumstances. What this means is that you should be hanging on to your tax records for at least three years after filing. You’ll need those documents to defend yourself throughout the auditing process, so make sure they’re on hand and organized.
In general, there are three different types of tax audits. You’ll need to prepare differently depending on what kind of audit you’re going to face. The kind of audit that is most feared by the public at large is known as a field audit, which is when an IRS agent comes to your home to ask questions and verify your documentation in person. This almost never happens today. Correspondence audits are the most common type, and they require you to simply furnish documentation of claims you’ve made on your tax returns, and send relevant documentation to the IRS.
You might instead face an office audit, in which you will be required to come to an IRS office location to furnish documentation and answer questions. This is a bit more involved than a correspondence audit, and may take more time. You may request an extension from the IRS if you need more time getting your papers together and sorting out important matters. If you are facing an office audit, you would be best off contacting a tax attorney to help resolve your situation and appear at the IRS office on your behalf. Legal help is advisable even for those with an online accounting degree or other financial credentials. Any situation that involves direction questioning is best handled by a licensed legal professional.
If you are sent a correspondence audit, you shouldn’t have much to worry about. Just don’t procrastinate. Come up with your documentation and send it off as quickly as possible. If everything is in order, you should have nothing to worry about. Office and field audits though less common, are more of a concern and usually require legal assistance from an attorney. Above all, don’t panic. If your returns are accurate and honest, you have nothing to worry about, beyond the hassle of digging up old paperwork.
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