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Handling a Tax Audit is not as Difficult as it Seems
While most of us are adept at handling a crisis, a tax audit is something that the majority of people are unprepared for. Income tax is based on the honors system. You report your earnings, calculate the deductions allowed and pay taxes on the balance; based on your own calculations. However, the IRS or its “Discriminate Function” rating system may decide that you have either been dishonest or made a mistake in your calculations, thereby leading to the dreaded IRS audit.
There is little that you can do to avoid a tax audit. Even if you have been honest and paid your taxes without fail every year, you could still end up being audited by the IRS. What you can do and should do is prevent them from auditing new items and minimize the financial impact of the audit. However, this is not easy to achieve. The moment your name comes up for an audit, you are considered guilty until proven innocent. You need to prove that the IRS has made a mistake and not you. The good news is that you have experts like the tax attorneys at IRS Tax Pros to help you survive through the audit. A good tax attorney will have an effective strategy coupled with knowledge about the IRS system.
Here are some ways to deal with tax audits.
Delay the Audit
By the time you receive an audit notification, the IRS has their case ready. Delaying the audit offers you time to prepare. Taking an appointment at as late a date as possible is the first step in this strategy. If possible, your attorney can get the auditors to postpone the audit schedule, it can help you buy more time. Another possibility is if incidentally your attorney or you miss bringing any important document, it can also delay your audit.
Are you Providing More Than You Should?
The IRS can and generally request a whole lot of documents, some of which are not part of the audit. Tax returns of your spouse or returns filed for years that are not part of the audit can also be asked for. Your tax attorney will be able to guide you on what to produce and what documents to hold back. The trick here is to be cooperative and polite with the auditor, but not very helpful. An auditing agent who has to spend his energy chasing you is likely to close your case at the earliest. However, that happens when you can manage to slow them down without antagonizing them or giving them a reason to believe that you are stalling the proceedings.
Check and Re-check the Claims
Everyone makes mistakes, and tax collectors have been known to make mistakes. However, their mistakes can cost you money, so it is imperative that you and your tax attorney go over their calculations and claims with a fine-toothed comb. Mathematics is one area where most of us end up making silly mistakes. Why should the taxman be any different? Other than basic errors in calculation, there might be mistakes made by neglecting some of the deductibles; putting your income in the wrong category or even applying the wrong rule. Your tax attorney is the best person to find out these errors and bring them to the notice of the IRS.
Request a new Auditor
There is no reason to treat a taxpayer under audit with contempt or disdain. The taxpayer has rights and in case a tax auditor is rude, abusive or extremely contentious, the taxpayer can complain to the auditor’s manager and request a new auditor. The request may or may not be granted – however, the auditor will definitely be less contentious and polite from then on.
Dispute the Examination Report
Once the audit has been completed, you will receive an Examination Report from the IRS. The report covers a summary, the conclusions, and the bill of what you owe. Any discrepancy in the report can be disputed. Your tax attorney can dispute the findings of the report and ask the auditor what further proof may be required to prove your case. In most cases, the attorney requests for a period of at least thirty days to provide the proof.
Way Forward
If the auditor refuses to grant you the time, you can approach his manager. Tax audit managers are always under pressure to close cases. A reasonable dispute might bring about an agreement that will be in your favor. You may want to get in touch with your preferred tax attorney to take your case forward.
