Facing an IRS audit can be an extremely nerve-wracking experience. The questions, concerns, and overwhelming “what-if” thoughts can easily take over.
However, understanding the actual audit process and knowing how to prepare can help alleviate much of the stress associated with it.
Rest assured, this article will identify why someone may be audited, what exactly is involved in an IRS audit, and the possible steps to take to be fully prepared.
Why Am I Being Audited?
The IRS may initiate an audit for various reasons. Here are some common triggers for audits:
- Finding discrepancies in tax returns
- Having high income levels
- Claiming unusual or excessive deductions
- Being self-employed
- Finding inconsistencies compared to third-party reports
- Having a history of previous audits
- Being selected randomly
Receiving an audit notice doesn’t always indicate wrongdoing, but it’s essential to respond promptly and to cooperate fully with the IRS to address any concerns so that the audit can be resolved as efficiently as possible.
What Does The IRS Audit Process Look Like?
What is an IRS audit, anyway? In a nutshell, it’s an examination of an individual’s or business’ financial information and records to make sure that they are in compliance with tax laws and regulations.
Typically, there are three main types of IRS audits: correspondence audits, office audits, and field audits. Correspondence audits are usually conducted through the mail, while office audits and field audits involve in-person meetings with IRS agents.
During an audit, the IRS will request certain documents and records related to your tax return such as income statements, expense receipts, bank statements, etc.
They may also ask for additional documentation to support the deductions, credits, or other tax-related items that you claimed on your return.
How Can I Prepare For An IRS Audit?
Being prepared for an IRS audit is a key step to ensuring a smooth and successful process. Here are some steps you can take to make sure you are fully prepared:
- Organize Your Financial Records
Gather all relevant financial records. This will include income statements, expense receipts, bank statements, and any other documentation that could be related to your tax return. Organize your documents in a clear and simple manner so that it is easy to provide them to the IRS when requested.
- Review Your Tax Return
Go through your tax return with a fine tooth comb to ensure that all information is accurate and complete. Double-check for any errors or discrepancies that may raise red flags during the audit process. If you identify any mistakes, consider filing an amended return to correct them before the audit begins.
- Understand Your Rights
The IRS audit process can be overwhelming, and it’s important to know that you have certain rights during the audit. Consulting with a Tax Resolution Professional like the ones at PJN Tax Solutions can help you manage the process and communicate with the IRS. Having knowledgeable representation can prove to be invaluable when it comes to protecting your interests throughout the entire process.
- Respond Promptly to IRS Requests
If the IRS requests additional information or documentation during the audit, respond promptly and provide the requested materials in a quick and timely manner. If you fail to comply with IRS requests, it can result in delays or further scrutiny, so it’s essential to be proactive and cooperative throughout the audit process.
- Stay Calm and Cooperative
It is no secret that undergoing an IRS audit can be a stressful time, but it’s important to remain calm, cooperative, and professional at all times. Avoid making confrontational or defensive statements, and instead focus on providing accurate and relevant information to the IRS. Having a positive attitude and demeanor throughout the process can help facilitate a more amicable audit experience.
Facing an IRS audit may seem daunting and come as quite a shock, but with the right preparation and support, you can navigate the process with confidence. Remember to stay proactive, cooperative, and informed throughout the audit process.
If you find yourself facing an IRS audit, reach out to PJN Tax Solutions to help guide you. We can help alleviate any stress and uncertainty that may come up during the process and give you peace of mind.