Stacy Bush, Valdosta Today Business Contributor:
Few things strike fear into a taxpayer’s heart like a letter from the IRS. Fortunately, the odds of you ever being audited by the IRS are lower than ever. Recent budget cuts have reduced the number of IRS auditors, and last year the IRS audited less than one percent of the individual tax returns it received, the lowest level since 2004.
If you discover that you have been selected for an audit, don’t panic. While audits are stressful, there are several things you can do to get through as painlessly as possible.
Never ignore a notice
If you fail to respond by the given deadline, the IRS can automatically adjust your tax liability and send you the bill.
Call in the pros
If you’re being audited, the odds are already against you. Having a tax expert at hand to help you understand the process and handle the auditor’s requests can go a long way toward reducing your stress. The IRS can levy a wide range of penalties and professional advice may also help you minimize what you owe.
Keep good records and be ready to produce them
The IRS requires you to keep records to support any income or deduction that you claim on your return. Good organization will help you defend your position and may impress the auditor during any meetings. How long should you keep supporting documents on hand? Unfortunately, there’s no easy answer because it depends on your individual tax situation and the relevant statute of limitations. If you have questions about your personal record retention requirements, give us a call or speak to a qualified tax professional.
Be honest but be brief
Never lie to an auditor as that may be taken as evidence of fraud. The IRS treats suspicions of tax fraud very seriously and you want to reassure your auditor that you are being completely above-board in your dealings. But, don’t volunteer information or talk more than necessary. Don’t introduce prior year tax returns or any other documents unless the auditor specifically requests to see them.
Know your position and be prepared to defend it
Before responding to the audit request, read the Taxpayers’ Bill of Rights on IRS.gov to know your rights as a U.S. taxpayer. Research any relevant deductions or tax issues and be prepared to negotiate your position with the auditor and his or her supervisor.
Stacy Bush has practiced independent financial advising in the Valdosta area for 14 years. Growing up on a farm in Donalsonville, Georgia, he is keen to the financial needs of South Georgia and North Florida families. Stacy and his wife, Carla, live in Valdosta with their four children. You can submit questions about this article to askstacybush@lpl.com
