Audit tips: What should you do if you're audited? What steps should you take?
Audits happen. It's a fact of life. Less than one percent of all taxpayers are audited each year, but these people are expected to meet certain deadlines and present all receipts and adjoining information in an orderly fashion. Here is a list of things to remember if you are audited by the Internal Revenue Service.
• Be honest. Attorneys and IRS officials can tell when you're lying. If you don't have the documentation to support something, don't be afraid to tell them. Not every item on your return requires supporting evidence.
• Consider hiring an attorney. Only attorneys, enrolled tax agents, and certified public accountants are allowed to represent you in front of the Department of the Treasury. Having someone to represent you, if you have a complicated case, can save you a lot of headaches.
• Meet all deadlines. When you're audited you are likely given a date by which you need to report all your pertinent information to the IRS. Make sure you meet the deadline. Extensions are possible, but your best bet is to act quickly and confidently.
• Your tax preparer may be a witness. If your taxes were prepared by someone other yourself and the person representing you, that person may –and might be expected to–act as a witness in your audit.
• Many preparers will pay all fees and penalties. If the IRS finds that an error was made, and it was the fault of your preparer, your tax preparer likely will take care of the penalties itself. Make sure you read your agreement with your tax preparer on this matter.
• The penalty for filing false information is severe. You don't want to do that. Make sure your information is accurate, or you could be subject to severe fines and penalties.
• Gather all your documents. A good rule is to keep all your tax information for five years past the original filing in case you're audited. After five years for individuals, it's safe to throw that information out. If you don't have a particularly key receipt, don't be afraid to call the vendor or the person who wrote out the receipt and ask for a new one.