You might assume the tax filing deadline means you can stop worrying about taxes for the year. However, a handful of business owners and individuals will face one more hurdle: a dreaded tax audit.
While you don't need to panic, you do need to take an audit notice seriously. In this post, we'll cover three steps you need to follow.
Also, remember that tax audits do not always end adversely. The IRS computer algorithms may flag your return because charitable giving is higher than certain thresholds or it wants to verify business expenses.
Open and carefully read the audit letter
The worst thing that you can do is leave a letter from the IRS unopened at the bottom of a pile. The problem will only grow worse.
By reading the letter carefully, you will likely get a sense for the severity of the issue. This is also a good time to speak with a tax attorney, who can help you identify all potential issues and assist in resolving them.
The first communication from the IRS is always a letter. The IRS does not use email or call you out of the blue to demand a tax payment.
Organize your tax records file
Whether the audit is of your business or individual return, you need to be organized. You'll likely need receipts that support expenses, bank statements, Quickbooks data, any ledgers (for example, a notebook used to track business mileage on a personal vehicle) and titles for property.
If the IRS requests specific documents, make sure to have them available.
Don't offer additional information
Many tax professionals agree that you should not volunteer information. In addition, do not make up excuses.
Seeking representation from a tax attorney helps. The attorney can often handle all communication with the IRS on your behalf.