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Audit Defense Survival
Delay the audit
Postponing your audit can really work to your advantage. The IRS must complete an audit within three years of the time the tax return is filed, unless the IRS finds tax fraud or a significant underreporting of income. Do not be discouraged from asking for more time to gather the necessary documents.
Do Not Play Host/hostess
Hosting the Audit at your business or home can feel overwhelming. It also puts you on the spot when questioned. Go to an IRS office or consult a pro like Edge Financial to handle it for you. By doing this, you allow yourself time to gather and re-create if necessary.
Have realistic expectations
This is going to sting. Don’t expect to come out of the audit without owing something — the odds are against you. According to various reports, an average adjustment for an office audit (held at the IRS office) is $4,000; the average adjustment for a field audit is $17,000.
Don’t over talk it! Ever heard the expression Less is More? Well in this case that just might be it. Never give more information or explanation that is requested. You do not want to lie but Don’t ask Don’t tell is definitely not a bad thing. Do not give incriminating evidence, holding back may result in adjustments much lower than if you give all the pieces of the puzzle. If in doubt, see a tax pro.
Don’t offer other years’ returns
Do not offer to give other years’ returns, or given in general. You do not want to bring anything that does not pertain to the year in question. Doing so make curious minds wander and you may open yourself up to another year being opened up and reviewed. Bottom line, if it was not asked for, do not bring it.
If you are missing receipts or other documents, you are allowed to reconstruct records. Try to organize all records the auditor might ask for before the audit. Being organized can work to your advantage. It will create less confusion and make you appear to have your ducks in a row.
Ask the auditor about disallowances she is considering, and defend your position. Don’t try to negotiate the amount of taxes to be paid. Instead,negotiate any deductions not being allowed. Also, don’t negotiate by telling the auditor you can’t pay the bill– that’s not the auditor’s concern.
Consult a tax pro
If at anytime the audit is not going well or you just feel overwhelmed, consult a PRO! Don’t make a knee jerk reaction and dig a hole you cannot get out of. A pro is just that, a pro. They will know the ins and outs and truly lessen your burden.
Appeal the result.
When you get the examination report, call the auditor if you don’t understand or agree with it. Meet with them or possible their manager to see if something can be reconsidered. If you find that you have poor results and you just do not agree, you are able to go to Tax Court or appeal the decision.