If you have received a letter from the Internal Revenue Service (“IRS”), Franchise Tax Board, or other tax agency, informing you that your tax return is subject to audit, don’t panic. Having a tax return audited does not always suggest that the taxpayer has made an error or has been dishonest. In fact, some audits result in a refund to the taxpayer or acceptance of the return without change. Even if you have made a mistake, the key is understanding how the IRS works and what you can expect from the audit process. The number one rule is not to ignore the IRS! The following are a few tips to guide you through the audit process.
• Hire professional help. Your best bet if you're audited is to retain the services of a qualified and experienced tax accountant who can argue your case without passion or prejudice. These professionals already know the most effective ways to help you quickly resolve a conflict with the taxing agency. In addition, the tax code has become so complicated that you're unlikely to know the law as it applies to your tax return and your rights as a taxpayer.
• Respond to the notice. You generally will have 10 days to respond to the initial notice requesting a meeting. You will normally have 30 days to obtain all the information requested by the agent. The audit notice will give you information as to what items are being examined. Knowing what's being scrutinized will help you determine what you need to bring to the audit, so you can substantiate the items in question. Be aware that the agent upon setting the initial meeting will send a more comprehensive list of items to be audited.
• Get your records organized and complete. Make the auditor's job easier by having organized and complete records. Organized records generally indicate to the auditor that that all of your items are documented and justified. Group each of the items in question, or attach an adding-machine tape that matches the tax return, and any other organization methods that will make it easily identifiable by the auditor for quick review of the important issues. You cannot simply throw your records in a bag, drop it on the auditor's desk, and think that they will figure it out. It is the tax payer’s legal obligation to be able to support all items on their tax return.
• Provide only records that are requested. Leave at home any additional records and items not requested in the original audit notice. Also do not bring original documents to the audit. If you do bring originals, have the agent copy immediately and return the original. There is a high probability that the documents could get lost. The taxing agency isn't responsible for documents lost in its possession.
In recent years, certain tax agencies have been increasing the amount of audits. If you get a notice from a tax agency notifying you that you have been selected for audit, your best bet is to seek out a qualified tax professional. Don’t hesitate to give dbbmckennon a call or email today. We have a significant amount of experience in handling IRS, Franchise Tax Board, State Board of Equalization (sales taxes), etc. We would be happy to help answer your questions or assist you with your needs.