IRS will audit hundreds
of thousands of individual tax returns this year. Although that represents but
a small percentage of all returns filed, this is little consolation if your
return is among those selected for audit. But with proper preparation and
planning, you should fare well.
The purpose of the audit
is to verify items reported on a tax return. The easiest way to survive a tax
audit is to prepare for one in advance. On an ongoing basis you should
systematically maintain documentation—invoices, bills, cancelled checks,
receipts or other proof—for all items to be reported on your tax return. Keep
all your records in one place and hold on to your calculations.
The government normally
has three years within which to conduct an audit, and often the audit won't
begin until a year or more after you file your return. So don't trust your
memory. Leave a good trail. If you have to go back to your records later, you
should be able to backtrack all of the entries on your return.
The scope of an audit
depends on the complexity of the return being examined. A return reflecting
business or real estate income and expenses is likely to take longer to audit
than a return reflecting only salary income. You can facilitate matters by
having the necessary records arranged in an orderly and systematic fashion for
presentation to the IRS agent. The typical IRS agent is experienced and knows
his job. Trying to outsmart the agent or sidestepping questions is likely to
create friction and raise suspicions in the agent's mind.
Representation. Even if
you prepared your own return, it is often advisable to have a tax professional
represent you at an audit. Your representative knows what issues the IRS agent
is likely to focus on and can prepare accordingly. More importantly, a tax
professional knows that in many instances IRS agents will take a position (for
example, to disallow deduction of a certain type of expense) even though courts
and other authority have expressed a contrary opinion on the issue. Because the
representative knows and can point to the proper authority, the IRS agent may
be forced to throw in the towel.
If you are facing a tax
audit or simply want to improve your recordkeeping, my office stands ready to
assist you. Please call to set up an appointment to discuss this or any other
aspect of your taxes. If you found this Tax Tip helpful, please share it
through your social media platforms.
(651)
621-5777, (952) 583-9108, (612) 224-2476, (763) 269-5396
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