How to prepare for an audit
It's the last thing most people want to see at this tax-paying
time of the year: A plain brown envelope marked "Official Government Business"
with the return address of the Internal Revenue Service.
don't panic. The news might not be as bad as you think.
a full-blown tax
audit might be your first thought, that notice might be the extent of your
contact with the IRS. The agency might be telling you that you've made a math
error on your return that must be fixed. Or maybe something on your W-2 doesn't
agree with your tax return. In such correspondence-audit situations, you usually
can clear up the discrepancy with a couple of exchanges of information via the
Then again, the worst could happen and that envelope
could be a notice that one of your past tax returns is being audited in full.
In this case, what do you do?
Sharon Tabor Warren, an enrolled
agent and author from Amherst County, Va., says, "If I have prepared
the client's tax return for the year under audit, I ask them for an IRS power
of attorney, Form 2848, and to forward their audit notice to me. Then, I tell
them to sit back and relax -- I'll handle it from there."
makes a good case for having a professional prepare your tax returns!
continues, "I never recommend that a client call the IRS themselves nor attend
the audit. They can unwittingly reveal information that is not required and potentially
cause more problems." A tax professional licensed to practice before the
IRS can deal with the IRS and attend the audit for you.
with professional representation, you still must prepare for an audit by gathering
information and taking it to your tax representative. Carol, a Massachusetts resident who endured an audit, says that her three top tips for preparing for the experience are "good records, good records and more good records."
In other words, adequate record keeping year round, not just on April 15, is essential
in case of an audit.
More specifically, how should you, a
taxpayer, prepare for an audit if it happens? These tips will point you in the
- Retain the services
of a professional. Enrolled agents, tax attorneys or CPAs may represent
you at an audit. They are trained in tax law and can represent you much better
than you can represent yourself. To a lay person, reading the tax code is like
reading a foreign language. Enrolled agents have been around since the post-Civil
War days and go through relatively grueling training in this very area.
|-- Updated: March