5 Tips to Help You Survive an Audit
Finding out you are the subject of an audit can be stressful and scary. But there is some basic information that can help make this process easier. In this article, we will go over 5 tips to help you survive an audit.
It Does Not Mean You Have Done Something Wrong
Being the subject of an audit doesn’t mean they are accusing you of wrongdoing. An audit is an unbiased review to determine the accuracy of your return. You will need to prove to the IRS the validity of income, eligible tax credits, deductions, and any exemptions shown on your return. Usually, the IRS must file an audit within three years of when you filed the tax return.
Certain Red Flags Increase the Risk of an Audit
There are certain red flags that will make it more likely for an audit to occur. For example. If you are self-employed, the majority of your income is in tips, or you run a cash business you are more likely to be audited. You also increase your risk if you take above average itemized deduction, your income does not match your w2s and 1099s, you claimed the earned income tax credit, or you are missing schedules.
There Are Different Types of Audits
There are different levels of audits. First, is a correspondence audit. These are usually used to correct simple mistakes. All you will need to do is mail back the requested documentation to the IRS. You will not need to do anything else if the IRS is satisfied with what you submit. Second, is an office audit. With this type of audit, you will bring your records to an IRS office for examination. Third, is a field audit. With this an agent will visit your home or office to review your paperwork. You may request that they visit the office of your representative instead. This would include an attorney, CPA or Enrolled Agent.
You Have the Ability to Appeal
If you do not agree with the final verdict, you can dispute it through a mediation process called Alternate Dispute Resolution. You also can file an appeal with the IRS appeals office. If you want to do this, you must send a protest letter to the IRS within 30 days of receiving your audit report. If necessary, you can also further your proceedings at the US Tax Court, US Court of Federal Claims, or the US District Court.
You Can Survive an Audit
It is possible to survive an audit. These 5 tips can help you understand what is going on. If you are at a loss of what to do, hire an attorney, CPA, or EA to help you with your audit.
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