The average person has a less than 1% chance of being audited. To be at serious risk of an audit, your yearly income needs to rank in the millions. If you do fit in that financial category, however, then you have a 1 in 6 chance of being audited by the IRS. As such, you need to be prepared beforehand for that possibility, so you can get out in front of it fast. If you are looking for tax preparation services in Yonkers NY, here are the main precautions to take in case you are audited.
#1. Identify the audit
An audit can take three forms:
- Correspondence audits: the default form, usually made in response to a typo or mathematical error on your tax returns
- Office audits: This is the much more feared version, where you’re required to go to an IRS office and fill out a mountain of paperwork. This usually happens when you have an unusually high tax deduction, like a costly medical expense.
- Field audits: This is essentially an office audit in reverse. Rather than you going to an IRS office, the IRS comes to you. They come to your home/business (wherever you keep your records) and ask if they cans see your records.
Being aware of what type of audit you’re facing down is a key foundation when it comes to dealing with it.
#2. Schedule the audit
If you got one of the latter two audits, then you’ll need to set up an appointment with the IRS. Make sure you can give yourself enough time to get everything in order, so if the times available don’t work for you, request a postponement of the appointment.
#3. Gather documents
Dealing with an audit of any kind requires an extra level of thoroughness. As such, when preparing for an audit, use the time you’ve managed to get before the appointment to gather all necessary documents. These include your W-2, bank statements, 1099’s, investment statements, proof of income, and any bills, receipts, or any other evidence of expenses you have lying around. If you run a business, and your audit stems from your business deductions, you need to have a detailed record stating that any and all expenses were legitimate in nature. If you have failed to do this, don’t worry, you will be allowed under a majority of circumstances to reconstruct any missing files. Whether those new files are accepted will depend on your auditor.
After that, there’s not much left but to meet up with the IRS and work it all out from there. Taking these early steps will shift the tide greatly in your favor, and increase your chances of coming out financially stable.
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