Preparing accurate tax returns is already stressful enough for many people, so it’s not surprising that everyone wants to get it done as quickly as possible. However, it’s important to check through the return multiple times before filing because not doing so could have dire consequences; a single mistake is enough to end up with a dreaded audit notice from the IRS.
Although in many cases these mistakes in tax returns can be clarified rather easily, it’s understandable that taxpayers would rather hide under a rock than face an IRS audit alone. But contrary to popular belief, tax audits aren’t as frightening as they are thought to be – especially if you also have your tax prep software provider by your side.
Best to Be Prepared
The thought of being audited by the IRS is fuel for nightmares, but the thing is that if you earn less than $200,000 a year then there’s only a 1% chance that you might be affected. Simply put, if taxpayers are honest in their returns or don’t claim unusual amounts in deductions, the IRS will leave them be. But even if the dreaded notice does land on the front porch, it’s usually informing the audited person that the IRS found something in the return that simply needs clarification.
Still, it’s better to be prepared for a possible IRS audit, which can occur within three years of filing the questioned return. This is why tax programs ask thorough questions, so taxpayers will avoid providing false information to the IRS. Many tax software providers even offer their users audit assistance as an optional service that doesn’t include representation during an audit but does help taxpayers deal with the IRS notice and prepares them to face the auditors in a confident manner.
The Steps of Surviving the IRS Audit
Whether you decide to deal with the situation on your own or enlist the help of your tax program provider to properly prepare for the audit, the process itself usually involves the following steps:
Step 1: Understanding the IRS’s Intentions
Should one of these audit notices find their way to you, probably the first thing you’ll notice is the fact that these letters are often full with technical jargon. As such, the very first thing to do is to understand what the IRS wants from you, what documents you will need to clarify yourself, and whether you will need to pay any penalties or fees. This is actually one of the areas where a tax software’s audit assistance can help since they can decode the IRS’s message and present it to the taxpayer in a more understandable fashion.
However, note that the IRS only communicates with audited taxpayers via snail mail, meaning that any notices received via phone or email are simply scams.
Step 2: Learning How the Audit Will Be Conducted
Depending on how the IRS will conduct the audit, you should determine how severe the case is and what documents you’ll need. If it happens by mail via correspondence audit, then it’s probably nothing more than a small error in the return. However, if the audit will take place in a local IRS office or at the taxpayer’s residence, it’s better to be prepared for a lengthy process.
Step 3: Gathering the Necessary Documents
The hard part of the process is digging up the necessary forms, receipts and anything relevant that can verify the accuracy of the filed return. Granted, this is frustrating but remember that some of the required documents have already been entered into the return, which are waiting to be downloaded from the tax software. However, if a tax program’s audit assistance service is involved as well, then it can tell you exactly what you’ll need and therefore avoiding sending any documents to the IRS that are completely irrelevant.
Step 4: Responding to the IRS
Although it would be logical to just send in the required documents that clarify the disputed return, the audited taxpayer has to write an official letter and attach the documents to it. The good news is that tax software providers can help you with this as well by providing examples on how such letters can be worded in a professional manner. Additionally, they can also alert taxpayers to ensure they respond to the IRS’s notice as soon as possible, which is highly recommended in order to avoid further questions and to show full compliance with the auditors.
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