So, you’re about to be audited. Don’t panic! Let’s follow some suggestions on how to survive a tax audit, so you can keep your cool and not end up losing more dollars.
The truth about tax auditors
No one likes to be the bad guy, and the tax auditor is not your enemy. He or she is already tagged as the “bad” one, or an annoying person, because of that negative first impression. That, unfortunately, adds unnecessary anxiety to these people’s job. The auditor’s responsibility is to verify if the information you provided is correct. Your reactions and behavior will be closely observed. Being nice and courteous will ease negotiations and will make your audit less stressful.
What you should and shouldn’t do during a tax audit
Don’t volunteer too much information. You’re already on edge because of the audit. Try not to worsen your situation by looking guilty. Make sure to have a positive or negative reply to the queries. Be honest about the questions that you aren’t really sure of the “right” answer. Provide documents when asked and avoid being too much of open book. The auditor might add to your obligation for items not included in your return, so just stay within the confines of the paper in front of you.
Be honest. It will be worse if you say something that can’t be verified. The audit is there to confirm what you claimed to have been accurate. You’ll put yourself in dire straits by stating something you made up or didn’t appear on your return in the first place.
Focus on the year in question. Don’t do something stupid like presenting old or past tax returns. Those might just come back and bite you in the rear end. Auditors can add to your bill if they see something from your past files. Don’t stray from what the IRS is requesting from you.
Organized files and other relevant information can go a long way: You’ll create a favorable atmosphere by sharing all the requested documents that look organized and clean. There may be some missing pieces, but these can be discussed with the auditor. The IRS may give you some leeway when they realize your extraordinary efforts to keep your tax obligations up-to-date.
Keep your cool and show the auditor a certain level of comfort. The more relaxed you are during the IRS audit process, the more you put the auditor at ease. Let go of those jitters, and you’ll win the auditor’s trust that you are not hiding anything. So when asked what’s one of the secrets on how to survive a tax audit is, of course, to keep your cool.
Provide original copies upon request. Your original documents should always be in your possession. The IRS might lose the only copy you have and that would be such a tragedy. Keep those original copies close to your chest.
The IRS may apply substantial compliance for your situation. Even if your documentation may have some missing parts, the IRS will have this feeling that you’re doing your best to follow the tax laws. They might allow the deductions you initially stated.
You can appeal the audit should you disagree with it. An appeal can be made to the auditor if you are contesting the audit. If the person assigned to your case isn’t too accommodating, try appealing to the manager or go to higher management. You have every right to appeal any tax matters that you find questionable.
A tax professional might be able to help you: Call in the professionals to defend your case. It doesn’t hurt to have someone with experience in tax matters. He or she can guide you through an audit.
How you should handle a difficult auditor
Don’t allow the difficult auditor to push you around. Follow these suggestions to let them know you mean business.
You can request to have the audit delayed. No one likes to have his or her work delayed because that will affect the performance evaluation reports. Auditors don’t want delays, too. However, if you tell the difficult auditor that you might seek a delay in the proceedings, he or she might ease up on you a bit.
You may ask for a recess and return at a later time. If the difficult auditor insists that you can’t, you may tell him or her that you are hiring a tax professional. The auditor should allow you seek the help of a tax professional.
You can ask for a new auditor to review your case. The difficult auditor could trigger you to feel that things might be heating up too much and heading in an unfavorable direction. If you feel that there’s this unfairness or disrespect, you may speak with the manager that you feel you are not being treated professionally.
You may request for a new auditor to handle your situation. However, the request will most likely be rejected. But letting the difficult auditor know that you go straight to the manager may just warn him or her.
Let the auditor know that you can stand up for yourself. Don’t just sit down and allow the auditor to criticize or belittle you. Ask pertinent questions so the auditor remains alert that he or she should be able to explain important information. Try not to be a bully yourself by keeping things civil and polite. But because of your tenacious nature, in the auditor’s mind, he or she may get that feeling that you’re not that much of a pushover.
You can record the audit: Ten days before the audit, submit a written request to the IRS that you will record the proceedings. When the auditor becomes aware that every move will be recorded, maybe he or she won’t become too strict or difficult.
The important thing about audits is that you are providing information that is as accurate as possible. Make sure that whatever data you submitted was done in good faith. You might also run into some trouble with an auditor who might discredit any deductions claimed on your return.
How to survive a tax audit? Remember: there are no hard and fast rules in getting through an IRS audit. In any case, may these simple suggestions help you survive a tax audit because you have your game face on!