Tips to handle an IRS audit
Receiving a notice for an audit from the IRS can be nerve-wracking but its not an automatic “go to jail” card. Our Certified Financial Planner, Denisa Tova, is here to tell us how you can keep your cool and give the IRS what they want.
Many of the audit letters are only requests from the IRS for you to give them more detail on your tax return, provide supporting docs, or to clear up a math error. Sometimes the IRS will end up writing you a check.
So don’t panic, study the letter to figure out what part of the return is being questioned. If it concerns deductions or a tax credit, then submit COPIES of the supporting docs.
If they are asking about your entitlement to a tax deduction, consult your tax advisor before you respond to the IRS. Respond in writing and keep records!
That’s why it is important for you to know what’s in your returns, even if you use a tax professional. Keep accurate records to back up your deductions and tax credits.
How can someone reduce his or her chance of being audited?
Your chances to get audited depend on your income, your job and the types of tax deductions that you claimed on your tax return.
Generally, your chance of an IRS audit is greater if:
1) You claim large amounts of itemized deductions that exceed IRS targets.
2) You own or work in a business which receives cash and/or tips
3) Your business expenses are large in relation to your income on your tax return.
4) Have discrepancies in W-2 and 1099 reporting
Fail to sign your return. Believe it or not this can raise a flag and lead the IRS to look more closely at your return to see what else you may have missedAlertMe