An IRS tax audit is a process in which the Internal Revenue Service (IRS) reviews the financial records of a taxpayer to verify the accuracy of their tax return. During an audit, the IRS will review records such as receipts, bank statements, and other financial documents during an audit.
If the IRS discovers discrepancies, the taxpayer may be liable for unpaid taxes or penalties. Preparing for an IRS tax audit is vital to ensure that you can present all the necessary documentation to the IRS in a timely and organized manner.
Here are five steps you can take to prepare for an IRS tax audit:
1. Gather Your Documents
Having the correct documents is essential when preparing for an IRS audit. You should compile all the relevant documents you have related to your taxes. These documents may include bank statements, receipts, W-2s, 1099s, invoices, payment statements, and other similar documents. If you have any records from previous years, it’s important to gather them.
By having all of your documents readily available, you can ensure that you’re prepared for the audit. It’s also important to double-check that all your documents are up-to-date and accurate. If you’re missing any documents, you should contact the IRS to request them.
It’s also a good idea to make copies of all your documents, just in case. You can store these copies in a safe place, so you won’t have to worry about losing any important documents if your originals are misplaced.
2. Review Your Tax Return
When preparing for an IRS tax audit, one of the most important steps you can take is to review your tax return. It’s essential to make sure that your return is accurate and complete before the audit takes place. This will help ensure that you are prepared for any questions the auditor may ask regarding your return.
You should review your tax return for accuracy and completeness. Make sure that the information on the return is correct, including your name, address, Social Security number, and income. Ensure all deductions and credits claimed are accurate and that you have accurately reported your income.
3. Know Your Rights
You have the right to representation by a qualified tax professional, such as an accountant or attorney. You also have the right to have a third party present during the audit, such as a family member or friend. During the audit, you have the right to ask questions and take notes. Additionally, you can request that the auditor provide a written explanation of the audit results.
4. Hire a Professional
One of the most important steps you can take is to hire a professional to assist you. A professional can provide you with experienced advice and help you navigate the complex process of dealing with the IRS.
When choosing a professional to help you with your IRS audit, it’s important to ensure that they have experience and expertise in IRS audits. A professional should be able to provide you with detailed advice on the best course of action and can also represent you in court if necessary.
5. Be Patient
The last step in preparing for an IRS tax audit is to remain patient. The IRS will take the time they need to review your records and make its decision. It is not uncommon for an IRS audit to take up to a year or more to complete. During this time, you should remain as responsive as possible to any requests the IRS makes and not become discouraged. IRS agents are trained to identify discrepancies in tax returns, and if they find any, they will take the time to investigate further.
Taking the time to review your tax return and gathering the necessary documents beforehand will put you in a good position to answer audit questions. Additionally, seeking professional tax advice can help you understand the process and be more prepared. While IRS tax audits can be stressful, being prepared can make the process go smoother and help you get the best outcome possible.
Axiom Tax Resolution Group can provide you with a professional who can help you prepare for IRS tax audits in Birmingham, AL. Contact our pros to learn how we can be of assistance to you!