Every American citizen is required to report income tax returns to a government agency known as the Internal Revenue Service, known to many as the IRS. In many instances, the IRS reviews an individual’s information and accepts their payment or remits refunds as dictated by the computations illustrated in the returns.
However, in certain cases, the agency wishes to review such returns more thoroughly. This more extensive review is called an audit. Individuals subjected to an audit are encouraged to adhere to the following tips:
Refrain From Panicking
The phrase “being audited” often precipitates extreme fear. In certain cases, the IRS mandates audits after reviewing tax returns agency officials opine are suspect or subject to potential criminal activity. However, individuals who are audited should not automatically jump to such conclusions. Tax experts advise those facing this circumstance to remain calm and discuss the situation with a licensed and experienced accounting or financial professional.
Provide As Much Documentation As Possible
Sometimes audits occur because IRS officials make mistakes or overlook important pieces of information. Individuals who receive audit mandates are strongly advised to gather every bit of tax or financial documentation they can find and submit this material to the national taxing authority. Financial statements can contain significant amounts of data that might not always be easy to interpret. However, with careful review, discrepancies can be cleared up.
Respond In A Timely Manner
The initial and all subsequent communications one receives from the IRS regarding a potential audit will be sent through the mail. Responding to all inquiries and requests in a timely fashion serve the taxpayer’s best interests. The taxpayer in question will typically be given ample time to offer an appropriate response or provide any information the government wishes to see. Delayed responses could subject the taxpayer to significant fines or potential legal problems.
Know The Potential Outcomes
After the taxpayer has answered all the necessary inquiries and provided the required documentation, one of three outcomes will occur, no change, agreement or disagreement. The IRS will propose no change if the taxpayer provides the requested information and the agency is then satisfied with the original return. The IRS could propose changes and the taxpayer agrees to make such alterations to their return. Finally, the taxpayer can disagree with the suggested changes. Disagreements often require the taxpayer to request an appeal or state their case before a high ranking IRS official.