Prepare for an Income Tax Audit in USA in a cost effective way
If you have received a letter from the Internal Revenue Service (IRS) or the Franchise Tax Board (FTB), you may be a bit uneasy. Especially if you haven’t been particularly careful with your paperwork. However, you cannot deny their call for domestic taxes; even if you have foreign economic interests, you can opt to cooperate with tax auditors.
So, what’s there to do? Well, the first thing you will want to do is contact a good tax audit attorney. Having a skilled and experienced professional by your side can help you reduce stress as well as help organize your papers as much as possible. What’s more, they can help you set up new protocols and practices which will prevent your tax returns from being audited in the future.
Why Are You Being Audited?
There is a chance that your taxes have been chosen for inspection at random, but that is a really rare occasion. The much more likely scenario is that the agency in charge has found some reason to check up on you. Perhaps you have applied for too many deductions this year, or you have had a large cash influx.
Some other reasons include discrepancies between the W-2s and other tax forms form the reported amounts or significant variations between your income from this year and previous years. Or it can be as simple as having figures which may appear as if they were rounded up or down instead of reporting the exact figure.
Delay the Audit If Possible
The first thing you should do is request a delay from the agency. That will give you a lot more time to actually prepare and get your papers in order. IRS is usually willing to give you some time if you are not being audited too often and if you provide a good reason why you wouldn’t be ready at the time they indicated.
Don’t Tell Them What They Don’t Ask
Give the auditor as much information as they ask of you and be civil and professional when dealing with an auditor. However, don’t give them any paperwork they have not requested of you. Bring only the paperwork for the year that they are looking into to the meeting.
In the same vein, answer their questions when asked, but don’t talk to them about your finances more than is asked of you. Do not try to justify yourself or explain things, since they will be more focusing on what is written in the papers and less on what you have to say.
Research Your Rights and Obligations
The IRS actually provides a lot of free advice and guides about your rights and obligations on their website. Make sure that you research everything thoroughly before your audit starts. If you have consulted a tax audit attorney, ask them about your options if the audit doesn’t go all that well.
In that way, you can protect yourself from really damaging lines of investigation and misinterpretation of the data. For instance, you can ask for a recess so you can consult with your tax professional or complain to the authorities if you feel like you are being attacked by the auditor unfairly.
Be Prepared for Any Outcome
If you are being audited, chances are that the IRS will find something wrong with your papers, whether intentional or accidental. The odds are stacked heavily against you, so expect to be paying some amount of money to the IRS.
Despite this seemingly inevitable end result, you can still do something to mitigate the fallout. For instance, you can argue the specific tax issues with the auditor, and if the end result is really negative to you, you should definitively appeal to the parts of the report you disagree with or you don’t understand. More likely than not, they will be willing to reach a compromise with you.