On average, chances of someone earning less than $40,000 a year receiving an IRS audit letter are minimal. But if you’re unlucky enough, it’s not something to sweat over. The IRS probably wants to establish your honesty regarding your tax filings, as they sometimes do issue random audits. Whatever the case, the audit procedures can seem overwhelming. If found guilty, you’ll have to pay the amounts accrued together with penalty fees. So you need to understand the procedure of being audited by the IRS and know what to do during the process. Here are a few things to keep in mind.
1. Gather the relevant documents and receipts
There are three main types of audits: the correspondence audit, the office audit, and the field audit. The correspondence audit is usually prompted by a typo during filling. The IRS simply wants the original documents to countercheck why the forms filled in don’t match. So when you receive the IRS audit letter, start collecting and arranging your tax documents in order so that you can comply with their requests. Some of the documents include:
- W-2 Forms
- Form 1099s
- Bank statements
- Proof of income
- Investment statements
- Bills, receipts, or other expenses proof.
2. Hire a tax lawyer
If you’re like most people, you’re not conversant with the tax code. Furthermore, it might be your first time being audited by the IRS. Hiring professionals like tax lawyers who are conversant with the law and can raise flags when the auditor isn’t complying with the law can help a great deal. Furthermore, the IRS allows individuals to be represented by a professional as long as they write a letter of request. After approval, the IRS will not contact you directly. This way, you can have peace of mind as the IRS audit procedures continue in the background. However, for the correspondence audits, you can do that yourself.
3. Avoid being rude to the auditor
The IRS auditing is usually at the discretion of the auditing officer. Being rude or unfriendly to them simply because they’re conducting an audit will not help you in any way. In fact, it will only make matters worse, and small mistakes that the auditor would over look will become a big deal. Furthermore, the auditor is just doing his job. He’s not there because he hates you. So accommodate the auditor and be honest. Sometimes the IRS asks questions they know the answers to so that they can test your honesty.
4. Understand your rights during an audit
Auditing is a government activity that’s not supposed to be used to coerce anyone into doing anything. You therefore are not at the mercy of the auditor. You have the right to be informed. The auditor should tell you what is needed for you to comply. You also have the right to appeal the decision of the auditor as well as the right to be represented.
5. Review the audit findings
Once the audit procedures are over, review the findings and if there were mistakes, you will likely have to pay penalties together with the accrued tax amounts. If you’re lucky, nothing changes. And in some cases, you get a refund. If you disagree with the findings, you have 30 days to appeal.