The thought of going through an audit scares almost everyone. Even the big guys in large corporations don’t like going through the process. Below we will outline a few helpful tips for dealing with the fear of receiving an IRS audit notice and how you can avoid one in the first place.
If you have ever received a letter or know someone who has, listed below may have been some thoughts that have gone through yours or their minds:
Did I do something wrong? The answer is not always. Sometimes people are chosen for random audits. If there is a problem, the IRS will let you know what that reason is.
How do I get out of this? This is simple, you won’t. First, you need to settle your mind and understand that this is a process. Once audited, the process is not finished overnight and It takes time for the IRS to review your documents depending on the number of years they are reviewing. Hint, the one thing you can control is making sure your records are well-organized.
I don’t know what to do next. Having a fear of the IRS is legitimate and is more common than you may think. The worst thing you can do is panic. Call a tax professional to help you with the next steps, especially if the audit is causing you stress or is not your area of expertise.
What can you do if you receive a letter from the IRS? Here are some tips that can help you conquer your fears and be proactive if this happens to you:
- BREATHE! Don’t panic. Take a minute to digest the information and change your mindset from a reactive to a proactive one. Accept it and plan for what you will do next.
- Call a tax professional who can handle it for you. A lot of times, people try to handle the audit themselves and end up paying more in taxes than they should. The IRS will use scare tactics to make you think you owe more than you originally paid and a professional can help ensure you are not being taken advantage of.
- Respond to the notice in a timely manner. One of the reasons that the IRS appears scary is that the persons receiving the letter never responds to it. They hide the letters in a drawer or leave it in a pile somewhere, afraid to open it. If it is not addressed in a reasonable time period, they will use other tactics besides mail to get a hold of you.
- Get Organized! Make sure to gather all of your bank statements, credit card statements, and receipts. Try putting them in a box to send to the professional who will assist you in handling the audit. If there are other documents required, your tax professional will let you know.
- Relax! Audits are a process and are not quickly completed. Do not rush it or stress about how long the process takes. Give the auditor ample time to review everything. Your tax professional will guide you in the next steps. Let them fight for you! That’s what you pay them for. Right?
We’ve discussed what happens if you get called for an audit. So, what are some ways that can help prevent you from being called for an audit:
- Hire someone to manage your books regularly. They will know what expenses your business can take that can be written off on your taxes. They will also make sure your 1099 income reconciles to the income you are reporting.
- Hire a great tax preparer! They will know how best to prepare your taxes, so it isn’t flagged for an audit. They are exactly what their title suggests; a professional. As a professional, they will be able to guide you using their diverse knowledge of tax laws. Even, warn you in advance if they think the IRS will flag something on your return. All of these proactive steps are meant to decrease your chances of receiving an audit in the first place.
- Make sure you have quick access to all of your receipts and statements. Receipts will be required of you. If you are missing any receipts, they could charge you tax for reporting an expense that you couldn’t prove. The key here is to stay organized and have receipts as proof of your expense.
- Report all income, especially 1099 income. When companies send you a 1099, it is automatically reported to the IRS and they have it on file. If your income doesn’t line up with what they have in their system, it can trigger an audit.
On behalf of Small Business Accounting, we are here for you. Whether you need help organizing your finances in general, advice on what you can afford, or assistance with a current audit, have no fear. WE CAN HELP!
Call or email us today at firstname.lastname@example.org or 434-239-1989 and gain freedom from fear of the IRS.