Five Mistakes To Avoid If You're Undergoing An IRS Audit
Audits initiated by the IRS can cost you a lot of money if you don't handle them properly. For many people, facing an audit can cause stress and provoke feelings of dread. However, dealing with an audit isn't nearly as complicated or costly as most people assume.
You can get through your audit as smoothly as possible by avoiding the following five mistakes:
Trying to rush through the audit
While you might be eager to get your audit over with, you're probably better off if you take your time with it and delay whenever possible. It's important that you're constantly responding to the IRS and acknowledging their demands. At the same time, the IRS is typically very willing to provide extra time if a taxpayer requests it.
Having more time usually works to the taxpayer's advantage in an audit. When you ask for more time, your audit will be taken off your auditor's priority list, and this can help to take some of the heat off of you.
Procrastinating about handling the audit
It's fine to ask for more time for your audit. However, it's absolutely essential that you don't ignore correspondence from the IRS.
An audit from the IRS is not going to go away until you take care of it. In fact, things could get worse for you if you don't respond at all to correspondence from the IRS requesting an audit. Make sure you respond to all correspondence in a timely manner.
Attempting to handle the audit without professional help
It's important for you to work with an accountant to get through an IRS tax audit. You're putting yourself at risk if you're trying to handle the situation independently. Accountants and audit firms are experienced with handling audits and know what you need to do to protect yourself and minimize your tax liabilities.
Failing to fully understand correspondence from the IRS
Carefully reading through any correspondence from the IRS is essential. Too many taxpayers skim over correspondence from the IRS and don't fully understand what's being asked of them. You should have your accountant explain any correspondence to you so that you know you're taking the right steps towards a favorable resolution.
Providing information or documentation that you haven't been specifically asked for
Often, taxpayers make the mistake of furnishing unnecessary documentation that creates more problems for them. Any information you provide could potentially be used against you by the IRS.
You should understand exactly what information you need to provide. You should also limit yourself to only providing that information. Remember that if you're being audited for a particular year, you should not be supplying any documentation from a different year.