What To Do In An Audit

The biggest fear of most taxpayers is the looming possibility of an IRS tax audit.  The tax auditor appears almost as frightening as the dentist holding a drill right before a root canal.  It is best to just stay calm during an audit, and not let the auditor have any just cause to become more suspicious.      

However, getting audited is not a way of saying that you actually did something wrong.  It is very possible that the IRS would only like to verify receipts or some other form of documentation that supports your return.  This kind of audit is called the correspondence audit and happens to be the most frequent form of an audit.  It also is by far the easiest form of an audit, if an audit ever could be easy.   

In the event that you are ever audited, when the IRS contacts you, they will also state the precise section of your return that is going to be further investigated.  This will enable you to hopefully gather the necessary documents prior to that actual audit. 

Once you receive an audit notification, you will need to determine whether you want to handle the process by yourself, or if you will hire a tax professional.  The obvious benefit of hiring a tax professional for an audit is for the additional guidance. 

However, you might feel confident in handling the audit alone, especially if you typically prepare your return and are comfortable with the tax laws at hand.  The money factor might also play a role in your decision to hire a tax professional.  If it is going to cost more to hire the tax professional than the total amount that you could end up owing the IRS, then maybe it’s worth it to forego that expense of hiring the tax professional in the first place.    

Whether you decide that you are going to represent yourself or hire the tax professional, you should make the decision quickly to allow plenty of time for preparation.  If you choose to represent yourself, then it is important to gather and organize the required documentation promptly.  It is a bad idea to wait to start on the night before the audit and will only be more stressful for you.  The tax audit should be taken very seriously and you should definitely be prepared to the best of your ability.    

During the actual audit, keep to the topic of the current audit and to the relevant areas of the return.  If you volunteer any unnecessary information, it is possible that it will just lead to an additional audit, which you most certainly would probably like to avoid.