The Internal Revenue Service mainly exists in order to make your life a living nightmare. If you ever want to wake up and come back to the real world away from the invasiveness of an IRS audit, you’ll need to arm yourself with a bit of info to survive the process. Here are 10 tips to keep in mind when preparing for and dealing with the pressures of an IRS audit.
1.) File Taxes On Time
Your first line of defense is timely filing. By getting your annual return filed on time you start off staying on the IRS’s good side and you’re likely to lose less money due to late fees and penalties. The penalty for filing your return late is 5% per month, but if they find a reason to think you’re trying to defraud them, that penalty jumps higher. Many people file their tax returns well before the deadline, as soon as they have all their needed documents handy. The fact is though that as long as you file your tax return electronically or mail your tax return to the IRS by due date, you’re in good shape. Any later than that and you’ll need to request an extension from the IRS to avoid fees and penalties.
2.) Keep a Simple System
If you’re running more than one endeavor, keep the records for each pursuit separate from each other. You don’t want one of your businesses’ finances under scrutiny just because you mingled your files, figures, and data from another enterprise together with it. Have an easy-to-use uncomplicated filing system where you can retain your detailed accounting records.
3.) Keep Detailed Records
Save your receipts. Use a filing cabinet. Label your folders. Paying attention to the minutia in your accounting documents and ensuring every transaction is recorded fully and accurately
4.) Only Answer Questions Asked
In an effort to be helpful and transparent we sometimes volunteer more info than necessary when we are being scrutinized. This can be the result of nervousness and anxiety related to being audited, or it could just be in your nature to be open in your communication. Remember, however, that you can sometimes raise more questions while trying to supply answers, so just stick to answering questions that are directly asked of you by your auditor.
5.) Be Honest, Clear, and Concise
Tell the truth. If you find yourself the subject of an IRS audit as a result of some kind of impropriety, the best thing is to set the record straight and admit what you’ve done wrong. Cooperation can go a long way, and mistakes can be learned from. On the other hand, if you’re subject to a routine audit through no real fault of your own, you have nothing to hide, and brief sincere responses are your best bet.
If you feel like your auditor is being unfair to you in the auditing process, you can ask to speak with the auditor’s supervisor, or you can stop the audit process at any time to consult with a legal professional of your choosing.
7.) Ask Questions Ahead of Time
When you find out that you’re going to be audited, try to find out everything you can about the situation. Ask your auditor about everything you will need to do and have ready, and if there is anything you can do to make the process run smoothly.
8.) Hold Your Temper
The IRS digging into your business can be frustrating. For a business owner, it can be difficult to deal with someone rifling through all your personal documents and scrutinizing every penny of your income, but letting the process get the best of you will not benefit you in the end. If you find that you’re beginning to lose patience, take a deep breath and leave the room for a few minutes. Losing your temper won’t end the audit any sooner.
9.) Make an Offer
The IRS is often willing to settle your income tax debt for less than what they claim you owe. Make them an offer and see if they take it! The Internal Revenue Service also works with you if you need to break your past-due revenue into manageable monthly payments. If you’re really raw about the deal you got, you could consider appealing the case, but sometimes appealing can upend the stones that were left unturned during the first invasive audit, so consider your options carefully. And don’t insult them; Give them a reasonable offer and they’re inclined to take it and move on.
10.) Hire a Pro
The best way to survive an audit is to not deal with the IRS directly but let a pro do it. Once you sign a power of attorney, you are represented 100% and the IRS no longer deals with you directly. This is advantageous in that it saves you time and hassle for sure, while you have an expert professional with experience dealing with the IRS handling your case. Hiring a professional will take your emotions out of the equation and end up saving you money in the long run in plenty of instances.
Do you owe more than $10,000 in back taxes? Protect yourself. Protect your business. Contact IRS Solver for a consultation.