If you’re a traditional tax paying American adult, then you know what time of year it is. With every new year comes the infamous tax season. The time of year when millions of Americans fill out their W-2 forms and then wait for their tax returns. While it is a fairly standard and straightforward process, unfortunately, as with any other service or industry, there can be the occasional hiccup. And in the world of the Internal Revenue Service (IRS), a hiccup typically leads to an audit. Sometimes these are accidents either on your part or theirs, such as mathematical errors, and can usually be solved with a few letters containing relevant information sent to the agency. Other times, it is not as simple. And in those situations, the IRS wants to conduct a full audit. But don’t panic. Here are a few ways you can prepare for an audit.
Hire a Professional
One of the biggest ways that taxpayers being audited can make matters worse for themselves is by handling the situation alone. While many believe that they are, in fact, alone in a situation such as this, they are very wrong. There are tax professionals out there that are equipped to handle audits. If a taxpayer attends the audit themselves, they could accidentally reveal unimportant information, which could potentially lead to more headaches. Enrolled agents, tax attorneys and CPAs are all able to represent you at an audit. Unless you are intimately familiar with tax law, never assume that you can represent yourself!
Record Keeping Is Key
Do you use a calendar for your daily tasks? Do you use a planner, annotated with dozens of sticky notes or a virtual calendar through the Google suite to map out your every day? If so, you may want to apply that same ethic and time management style to your records. Keeping primary and secondary records is crucial. Primary records would be any receipts or bills, while mileage logs or spreadsheets would be considered secondary. Knowing exactly which record you need, and where it is, can make the audit a breeze.
Study, Study, Study
This may seem like a no-brainer, but actually do some research on what the audit experience is like. If you can get a good idea of what to expect at the audit, then there is a big chance that some of your fears or nervousness will simply disappear. A good way to prepare yourself for an audit is to ask around. Ask friends, coworkers or family members if they have gone through an audit before. If they have, they can give you some idea of what will happen. The best way to prepare, however, is to study the actual guide that the IRS gives its auditors. These guides are typically posted online and can give you some tremendous insight into what they auditors will be asking, which can definitely ease the anxiety.
While there are many other ways to prepare for an audit, these are just a few handy tips and rules of thumb. If you are interested in learning more about how to prepare for an audit, visit Bankrate.com.