A notification of an upcoming audit can induce panic and worry in the typical taxpayer. People who are alerted to impending audits stress over what may have caused their returns to be set aside for scrutiny or what they have done wrong when filing their taxes.
While you have the right to retain legal counsel to represent you in an audit, you may not want to bother with hiring a lawyer. You can use these tips to handle an audit by yourself and possibly come out of the process unscathed and with your finances and freedom intact.
Know Your Rights as a Taxpayer
As a taxpayer and defendant in the audit, you have rights that must be upheld even if you do not retain a lawyer for your case. You can find out what these rights are in the IRS publication 1, which you can find access on IRS.gov.
Examples of the rights to which you are entitled during an audit include:
- full written disclosure of the proceedings
- a recess during the proceedings
- intervention from the auditor's manager or superior
- fair treatment during the audit
- respect from the auditor
- prompt replies to your questions and concerns
Organize Your Tax Records
You will probably be expected to bring a host of documentation with you to the audit. After you receive notification of the upcoming proceedings, you should immediately start organizing and compiling your records.Some of the documentation that you might be asked to supply the auditor with include:
- W-2s, 1099s, or other earning statements
- bank records
- records of dividends and interest
- proof of expenses, deductions, and exemptions
- records of contributions to charities, retirement accounts, and other non-taxable funds
Find Out the Reason for the IRS Tax Audit
You have the right to find out why the IRS is auditing you. After you get an audit letter by certified mail, you should immediately call or contact the IRS to learn the reason for the audit.As you do so, however, it is important that you remain calm and objective rather than take an aggressive and accusatory tone. You should also not assume the worst. The audit may be the result of a random and entirely coincidental selection of your return.
Respond Promptly to IRS Communications
You cannot ignore a letter telling you that the IRS is going to audit you. Even if you toss the letter in the trash and fail to respond to further communications, you still will have to face being audited sooner rather than later.
Rather than pretend that you are not obligated to acknowledge the letter, it is better than you respond quickly and thoroughly to all IRS communications. Demonstrating that you are ready and capable of participating in the audit bodes well in your favor. It also sets the groundwork for an agreeable and cool-headed interaction between you and the auditor.
Retain a Tax Professional
While you may see no reason to retain a tax lawyer, you may want to consider the benefits that can come from hiring a tax professional to help you during an audit. A tax pro can be a powerful audit resource because this person will know what documents to provide the IRS with, what forms to fill out and submit, and what rights you have as a taxpayer.
A tax professional can also help you file missing returns or amend returns that might have triggered the audit in the first place. Your tax pro can likewise act as an intermediary during the proceedings and even speak on your behalf during the actual audit session. You avoid the worry, stress, and anxiety that might come from having to sit before an auditor and explain your actions as a taxpayer.
You may have no need to hire a lawyer to represent you during an audit. These self-help tips combined with retaining a tax professional prior to an audit may help you come out of the proceedings without incurring any legal or financial penalties.
