How to prepare for an audit
good records. It's not
in the habit
for an audit,
may be spreadsheets,
- 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
- 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.
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.
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.
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
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