3 Ways to Survive a Tax Audit

The purpose of an IRS tax audit is to ensure that the reported income, expenses, and deductions are accurate. Both businesses and individuals can experience such audits. Surviving an IRS tax audit is about having the adequate understanding, organization, and strategies in test.

While a tax audit can awaken many fears in people, it is a process that can be relatively painless. Here are three ways individuals and businesses can survive a tax audit:

1. Proper Understanding of the Process

The first step to understanding any IRS tax audit is to differentiate between the different types of audits. An audit by correspondence addresses one or two tax issues. It requires the taxpayer to provide supporting information for their taxes in the mail.

An office audit focuses on a certain part of the taxpayer’s taxes. It takes place at the IRS office. In the case of a field audit, an IRS agent performs the audit at the taxpayer’s home or business. While an audit by correspondence is not deemed to be critical, an office or field audit is more serious and may need increased attention.

2. Professional Advice

Obtaining adequate professional advice through Certified Public Accountants (CPAs), tax attorneys, or Enrolled Agents is recommended through IRS tax audits. While some lower-impact audits, such as those by correspondence, may not need professional tax advice, field and office audits will likely necessitate outside help. The right tax professional can help negotiate a beneficial case resolution and help you gather the appropriate documentation.

3. Adequate Preparation

Now that you have your professional working on strategy,  it may be necessary to reconstruct your financial records. To survive an IRS audit, it is important for both individuals and businesses to be well prepared. This means using a trustworthy accounting system such as Quickbooks or Xero. These automated systems are useful and reliable tools to produce enough accurate financial support.

It is also possible to reconstruct a business or individual’s financial transactions through existing online platforms. Reaching out to vendors and financial institutions is a good way to get the right support for your taxes.

Last but not least, taxpayers going through an IRS tax audit should maintain copies of their original financial support. This will help the process go smoother, while protecting your tax documentation.

As intimidating as it can be to have to go through a tax audit, taxpayers must remember that it is a common occurrence. As long as there is a proper understanding between the taxpayer and the IRS and the right strategies are used, it is a process that can be completed successfully.

The Balance Sheet is a bookkeeping and accounting services firm located in West Palm Beach, Florida. It was created by Maxine Taylor out of a need to help her clients make better projections and financial decisions for their businesses.

If you earn more than the amount that the IRS exempts as a qualified individual, then you will need to file taxes for the year. The amount that qualify is dependent on the individual’s filing status. So make sure you file your return on time. Read this article on Taxfyle for more details.

Sources:

• Laurence, J.D. Beth. “Checklist: How to Survive a Tax Audit.” Www.nolo.com. Accessed January 06, 2018. https://www.nolo.com/legal-encyclopedia/survive-irs-tax-audit-29478.html.
• Murray, Jean. “How to Survive an IRS Tax Audit of Your Business.” The Balance. Accessed January 06, 2018. https://www.thebalance.com/how-to-survive-an-irs-tax-audit-of-your-business-398979.
• Taulli, Tom. “4 Ways To Survive A Dreaded IRS Audit.” Forbes. August 06, 2017. Accessed January 06, 2018. https://www.forbes.com/sites/tomtaulli/2016/11/26/4-ways-to-survive-a-dreaded-irs-audit/#5dd.