If you are unlucky enough to be chosen for an audit, you need to handle the ordeal wisely. Follow these tips to make the process go smoothly.
In Part 1 of this series, we looked at a few steps to prepare for an IRS audit. Here in Part 2, let’s take a look at some do’s and don’ts when it comes to audits. While we’re at it, let’s debunk a few of those myths that surround the IRS that could impact the likelihood of an audit.
Do…Be Candid and Up Front with your Auditor
Don’t…Be Nasty, or Evasive, with the Auditor.
Lavishing your auditor with generous gifts is not just folly, it’s actually illegal. And the auditor can’t and won’t accept them anyway. Instead, give the gift of honesty. Most auditors aren’t interested in playing “gotcha,” and despite the IRS’ reputation, the agency’s goal is simply the proper enforcement of its tax code. Being upfront with your auditor will be best for everyone and will likely go a long way in clearing up and resolving any issues with your return. Keep your answers short and factual, but don’t leave things out, and don’t lie.
Do…Consider Professional Help
Don’t…Channel your Inner Matlock
Look, an audit can be serious business. If you’re unlucky enough to be chosen for one, go the extra mile and call in a tax professional, an attorney, or if necessary, both. You will have to notify the IRS of your decision to have representation; you can do so with a form 2848, downloadable from the IRS site. Tax professionals are familiar with the process, more likely to anticipate what you’ll need and when, and more familiar with the tax code. They also know what rights you have and don’t have—including disclosure requirements and the rights to appeals.
Do…File an Amended Return If You Spot an Error
Don’t…Think an Amended Return Triggers Audits
You’ve heard this trope, right? You realize there’s a mistake on your already-filed tax return. Everyone knows that filing an amended return wakes the sleeping giant, making an audit all but certain. Right?
This language is directly from the IRS website: “Filing an amended return does not affect the selection process of the original return. However, amended returns also go through a screening process and the amended return may be selected for audit.”
In other words, filing an amended return won’t stop an audit that’s already underway, and that amended return may be selected for an audit, just like any return can. But it doesn’t put a highlight or flag on your initial return, and while it may double your chances of having any audit (because you have now filed twice as many returns), not filing an amended return is a bad alternative. So if you realize a mistake, go the extra mile, file the amended return, and then get back to your daily life.
An IRS audit doesn’t have to be a horror film. You won’t want repeat viewings, but the protagonists typically live all the way to the end.