Bankrate.com
News & Advice Compare Rates Calculators
Rate Alerts  |  Glossary  |  Help
Mortgage Home
Equity
Auto CDs &
Investments
Retirement Checking &
Savings
Credit
Cards
Debt
Management
College
Finance
Taxes Personal
Finance
Bankrate's 2009 Tax Guide
Filing & refund
Get it done right the first time with this advice on free filing, e-filing, documentation and refunds.
 
Prep for audit
How to prepare for an audit
Page | 1 | 2 |


  • Keep good records. It's not enough to just pull your records together year-by-year April 15. Get in the habit of keeping good primary and secondary tax records year round and using a personal filing system to keep them with the appropriate tax return. Then, if you're tapped for an audit, you're prepared. "It alleviates so much stress when you can put your finger on a document when you need it," says Allison Einbinder, owner of the tax and accounting firm Dollars & Sense in Oakland, Calif. Primary records are bills and receipts. Secondary records may be spreadsheets, mileage logs or other summary information you've kept. Warren recommends that you keep all tax returns, but that you keep your backup information for the current year plus three past years.
  • Gather information. What if you haven't kept good records for the tax year in question? Go back to that year and try to re-create records as accurately as possible. If you've claimed expenses in certain areas, like medical expenses, it's possible that your doctor or hospital will still have those medical records on file. Don't hesitate to call them. You can also call your place of employment and ask for duplicate W-2s or 1099 forms; or check with your mortgage company for interest expenses for that year; or with your county for personal property taxes paid. Put everything in a neat format, summarized but with supporting documentation, to take to the audit with you.
  • Do your homework. Einbinder suggests you research what the audit process is likely to entail. "Check with people in your industry or workplace to see if any of them have gone through the process," she says. "Find out what it was like so you can prepare yourself. You might be able to avoid some of the stresses they endured." Knowing what questions the IRS examiner might ask can also help lower the fear factor. The agency prepares audit guides for its examiners, with many of them posted on the IRS Web site. Check them out, says Einbinder, so you can go into the audit knowing, at least in part, what the auditor is going to ask.
  • Behave professionally. Generally, the IRS will set the time and place for an audit. Comply with their wishes if possible. If you or your tax representative cannot attend the audit at the time they set, negotiate another time with them. Remember that taxpayer presentation is critical. "Be polite, prompt and professional," says Einbinder. "It will get you so much further." Don't show up at the audit wearing jeans and with your receipts in a shoe box. Be on time, be organized and take the audit seriously.
  • Realize that the IRS auditor is not your friend. You can be sure of two things with an IRS auditor. First, he/she pays their taxes. Second, there is an implicit assumption that you may have done something wrong, perhaps unwittingly, or you wouldn't be there in the first place. Be forthcoming with information but only answer questions that are directed to you. Never volunteer extra information. Don't be surly or impatient, but also, don't be fearful. Be confident that your tax return was correct and that you have records to prove it.

The good news is that all audits do not result in the taxpayer owing extra taxes. There are many audits that prove the IRS actually owes you instead of the other way around.

You can help put yourself in that latter category by taking the steps outlined earlier. And if you have a complex return or if you're unsure about calculating deductions, seriously consider hiring a tax professional to prepare your return. It may pay off in the long run. The best defense, with regard to an IRS audit, is always a good offense.

-- Updated: March 17, 2009
 
Page | 1 | 2 |



 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compare Rates
NATIONAL OVERNIGHT AVERAGES
30 yr fixed mtg 4.45%
48 month new car loan 3.77%
1 yr CD 0.89%
Rates may include points
- advertisement -
- advertisement -
- advertisement -
About Bankrate | Privacy Policy/Your California Privacy Rights | Online Media Kit | Partnerships | Investor Relations | Press Room | Contact Us | Sitemap
NYSE: RATE | RSS Feeds |

* Mortgage rate may include points. See rate tables for details. Click here.
* To see the definition of overnight averages click here.

Bankrate.com ®, Copyright © 2014 Bankrate, Inc., All Rights Reserved, Terms of Use.