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How to Prepare for an IRS Tax Audit Defense

An audit by the IRS does not have to be a horrible experience, and you can come through it unscathed. To increase your chance of a successful audit, you should prepare a strong audit defense. Your preparation should start the moment you receive notice from the IRS and continue through the weeks leading up to your audit to ensure you have a strong defense to help your chances of walking away with a positive result.

Review the Tax Return or Returns under Audit

Before you head into an audit, it is to your benefit to review the tax return or returns the IRS plans to audit. This helps you to be ready to answer any questions the auditor may have, especially about any deductions or credits. If someone else, such as a CPA or tax preparer, handled your return then you should have a session with the preparer to go over it with you. He or she may also be able to tell you why your return was flagged for an audit, which may be due to a particular concern or simply a random selection.

Find the Associated Records

It is up to you to prove that your tax return was filed correctly. Therefore, you need to find all the relevant records, including any income and expense receipts. It is best to organize them in a logical way. This helps you to find the relevant data when you need it during the audit. You should also include adding machine tapes on the receipts divided into the different classifications for deductions. If for some reason the totals do not match what is listed on your tax return, you need to prepare a reasonable explanation.

Refresh Yourself on Tax Laws

Tax returns are eligible for audit for three years, so the return about which you are audited may not be the freshest on your mind. Tax laws also continually change every year, which may have affected your return. Therefore, you should review the tax laws regarding any credits, deductions, or exemptions for that year. One way to find this information is during a discussion with a tax preparer, CPA, tax attorney, or other tax professional. You do not want to rely on asking the IRS. Although IRS agents can be helpful, their priority is to the IRS not the taxpayer.

Research Audits in Your Industry

Certain industries have particular areas at which auditors look more closely when reviewing returns. You can find out some of this information by reviewing the Audit Technique Guides published by the IRS. These forms detail the important areas to review for various businesses and occupations, as well as items that should have special attention during an audit. This helps you prepare better because you know for what the auditor may be looking.

Know Your Goals

Although everyone wants to go into an audit and come out not owing any more money, this should not be your only goal. There are greater odds that the auditor will find something in your form that requires you to pay additional taxes. Therefore, your main goal should be to get through the audit and minimize any financial damage, which you can do by being adequately prepared. You also want to prevent expansion, which mans you do not want to give the auditor any information for which you are not obligated to do so. This reduces the chance of the auditor starting to look for problems not covered on the original audit notice, including additional years.

When you prepare for an audit, you should always include just what is needed for the particular audit. Your audit letter includes what you need to bring, so you should only bring this information and nothing else. This information should be organized as neatly as possible. If you are afraid that you might miss something or need additional help preparing your audit defense, then contact Fidelity Tax Relief’s tax professionals at 877-372-2520.

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