Every year when we file our taxes, many of us live in fear of the dreaded audit. This problematic exchange comes into being when the IRS takes special interest in your tax return because they feel it contains one or more noteworthy discrepancies. They will then ask you to justify this questionable information. This can be an incredibly time consuming process, a careful wading through the past year’s finances. In the end, the IRS may conclude that you in fact owe them more money, but this is not always the case. Sometimes their suspicions will have been for naught, and the amount you’ve paid will stand. Regardless, you’ll have to go through the same stressful process either way. Because we understand how difficult getting through an audit can be, we at AFS Taxsavers are proud to offer you our services in the field of expert audit representation at the agent level. We’ll stand with you before the Tax Authorities and help you make your case.
How Do You Avoid an Audit?
There’s no way to absolutely ensure that you won’t be audited. In fact, the IRS conducts random audits every year basically as practice. That being said, there are many things you can do to lower your chances of being audited.
- Keep careful accounting records with dates clearly noted. Also, don’t assume that these records are disposable once the year is over. The IRS can audit you for a tax return filed as long as three years ago.
- Keep important receipts filed away.
- Be careful with your deductions. Include exact amounts taken straight from receipts. Also be prepared to justify every deduction. It’s important to get these justifications prepared and squared away in advance.
- Compare your business with others that are similar to ensure that your tax liability does not seem out of place.
- Be as neat as possible and organized as possible as messy tax returns are sure to get some extra attention.
- Don’t rely on your own mathematical skills or your tax software. Unless you’re an expert, you owe it to yourself to let one review your tax return. Our financial experts at AFS Taxsavers are happy to help you with all of your tax-related needs.
Audit Representation: How Do I Prepare for an Audit?
It all depends on the type being conducted.
- Perhaps the most well known and generally disliked type is the “correspondence audit”. This is an investigation conducted through the mail. It will require you to find documentation as requested by the IRS including receipts, pay stubs and tax returns. These documents are meant to help the IRS deduce whether or not the deductions you included in your tax return were in fact justified. They may also ask for more detailed explanations for more perplexing expenditures.
- The second type is known as the “field audit.” This involves an examiner from the IRS coming to your business to investigate a matter firsthand. He or she may want to see how the business deduction you claimed is benefiting your company. If they see the item that was deducted in action they may drop the charges. If not they may require further explanation.
- The final type is called an “office audit.” This is very similar to a correspondence audit, except it’s done in person. You’ll have to actually take all of those receipts and tax returns to an examiner’s office. You are allowed to send a representative in your place, one employed by AFS Taxsavers perhaps.
What Happens Next
- If the IRS is convinced that you are on the level they may drop the charges immediately.
- If not, they will send you what is known as a “30-day letter”. This contains their report, a detailed description of the funds the IRS feels it is owed and the reasons why. This letter should be taken to a tax expert, one employed by AFS Taxsavers for example, as soon as possible for examination. If you have a problem with their findings you and said expert should make absolutely sure that you have a case before you proceed. If he or she finds that you do not, you should simply pay the amount requested.
- You have two choices now. If you agree with the charges filed against you then you can pay what the IRS is asking for. You also have the option to appeal, though you can only do so within that 30 day period. If you choose to engage in this process you should be warned that it can take a year or more.
- What happens next depends on the result of your appeal. If you won, that’s that. If not, the IRS will send you a “90-day letter,” which will allow you the said period of time to appeal the ruling in Tax Court.
- At the end of this process if you’re right you’re free and clear, but if you lose your case you’ll have to pay the original amount plus late fees. Weigh your options carefully and employ the assistance of an AFS Taxsavers professional.