So, did you receive the much-dreaded notice that your income tax return has been subject to a more official review? This means that your business will be subject to an audit. It is true that an audit can never be good news for a person or a company, but at the same time it is not a catastrophe that can’t be dealt with. Once you start keeping your wits with you and you start following the best strategies that have been discussed by the experts, you’ll safely survive through an audit and file yet another safe tax return. Here are the steps that you can take.
#1: Get a clear idea on the kind of audit you’re going to face
Are you aware of the 3 different kinds of audits that are there? Office examination, mail or correspondence audits and field audits are the types that you should be aware of. Majority or 80-85% of the audits which take place are correspondence or mail audits. Luckily, they’re just restrained to asking few questions and as Uncle Sam receives answers that seem to be satisfactory enough, they’re done. A local IRS branch conducts office examination audits and you’ll have to be physically present there. On the contrary, field audits are the most extensive ones.
#2: Know what exactly are sought by the auditors
As mentioned earlier, all audits might be different from each other but they usually concentrate on the few basic queries:
- Do you own a business or it’s a hobby for you?
- Are you sure about having reported all income that you make?
- Are the deductions legitimate enough?
If you can provide impressive and credible answers to all the 3 questions, you will have a good chance of emerging uninjured from the audit.
#3: Gather all documents beforehand
Make sure you go through the letters carefully, whichever you receive. In case you deal with correspondence audit, make a list of the documents that you have been asked to produce. The audit notification letter will give you a list that should be taken care of. No matter you report in person or you prepare in your home for the audit, you should have all the paperwork ready. You should also get enough time to prepare your point against the audit representative.
#4: Be honest about everything
The worst idea is to lie to the IRS. The IRS auditors will initially ask you questions which you will definitely know and hence you’re expected to give truest answers. In case you get caught in such lies, you’ll be finished. The IRS will harass you and will never believe you with whatever you say after that. In case you make a false claim, you require giving documentation to have a backup of what you’re claiming.
You can read more on IRS audits before taking any further step so that you don’t take any wrong step which can boomerang you in the long run.
