Didn’t pay your taxes on time or filed incorrectly? It happens to plenty of people, but it can still be a scary experience to be audited by the IRS. Luckily, there are plenty of steps you can take to make it as painless a process as possible. If you aren’t sure where to start, take a look at the steps below to get your finances back on track.
Understand Why You’re Being Audited
Before you run for the hills, make sure you understand exactly why the IRS has contacted you. In many cases, you may have just made a small error on a form and they’re reaching out to confirm whether or not the information you provided is correct.
Sometimes the IRS even randomly audits taxpayers for data collection purposes even if there’s nothing wrong with your paperwork. However, if it’s clear that you owe money, it’s important to know when and how the IRS plans to collect the debt.
If you receive an IRS levy, it’s possible you will have property seized or other assets frozen to pay off what you owe. Determine when, how, and what the audit will affect so you can create a plan to settle the debt.
Gather All Your Documents
Track down every receipt, tax form, business log, loan confirmation, and any other document that can help prove to the IRS that your original filing was correct. At the very least, this can help lower the amount of money you owe.
Keeping an organized record of your finances can significantly reduce the amount of time you spend sorting out the audit. The IRS can only audit your tax returns from the last three years, so remember to gather all evidence during that time period that could help your case.
Consult a Professional
While you can often resolve an IRS audit on your own, hiring a tax professional can help with more complicated matters. One great reason to hire a tax attorney or consult a tax relief company is to have them help you answer invasive questions.
While you should never lie to an auditor, tax professionals are trained to help get you through the process without prompting any more questions or lengthy review periods from the IRS. When you aren’t familiar with all the complex legal jargon of an audit or the various tax codes that may apply to your specific circumstance, an expert with years of experience in the field can guide you through it much quicker than you would be able to on your own.
Keep Open Lines of Communication
Now that you’ve entered the actual audit process, remember to stay on top of your correspondences so you don’t encounter any obstacles. Be polite, prompt, and forth-coming with any piece of information they might request.
Remember, the goal is to get rid of or lower the amount of money the IRS believes you owe. Misleading an auditor because you’re angry or stressed can end up costing you more, so make sure you are always available to calmly discuss your case whenever they need more details.
Figure out a Payment Plan
If you discover you in fact owe some unpaid taxes, determine what kind of payment plan best suits you needs. Can you afford to pay back the entire amount in one sitting? Oftentimes that isn’t the case. If you want to figure out a repayment plan with the IRS, there are plenty of options for creating an installment plan to get you back on track.
While you will pay interest during this time period, a payment plan will help prevent any more serious issues like liens or asset seizures. If you’re worried about an audit repayment plan showing up on your credit score, don’t be—your number will be unaffected by this process.
Accept or Reject the Audit Findings
Once a conclusion has been reached over your debt, it’s time to decide the next step you want to take in the process. You have two options at this point: accept what the IRS says you owe, or request an appeal of your case. If you aren’t satisfied, you can clear up the points of contention you have with an unbiased examiner who will review all the facts of your case.
In some instances, you may take your case to court if there are serious disputes between what is owed to the IRS. However, if you don’t appeal within 60 days, the IRS considers their findings final and will collect any debt that you still owe to them.
Follow these steps and you should be able to get through the audit process in no time. Keep a positive attitude, an organized filing cabinet, and a tax professional close at hand, and you’ll barely notice the inconvenience of an IRS audit.