If there is anything that can strike terror in the hearts of most taxpayers, it’s a tax audit. While it is important to take a tax audit notice seriously, you shouldn’t panic. The Nevada Society of CPAs answers some questions people frequently ask regarding tax audits.
What Can I Do to Avoid Being Audited?
There is nothing you can do to guarantee you will not be audited. However, you can protect yourself by making sure you have completed the return honestly, and by keeping complete and accurate records so you can substantiate every number on your return. If your return contains any item you think the IRS may find questionable, including a letter of explanation may help to ward off an audit.
Is There A Time Limit for Audits?
Generally, the IRS can audit your return within three years from the later of the date the return was due or when it was actually filed. If you substantially underreport your income or file no return, there is no statute of limitations regarding when your return can be audited.
What Should I Do to Prepare for an Audit?
One of the first things to do is to read IRS Publication 1, Taxpayer’s Bill of Rights. This document spells out how the IRS must conduct an audit and explains the rights of a taxpayer whose return is being examined. Next, review your return thoroughly to refresh your memory, especially if it’s been a couple of years since you filed. The final step is to start collecting all the relevant records and documentation you need to support your income, deductions and credits.
What Is the Best Way to Get Through the Audit?
Following a few ground rules may help the audit progress more smoothly. Be courteous, businesslike and on time. Present your records in an organized manner. Supply only the information and records requested – volunteering extra information may open up additional areas of inquiry.
What If I Don’t Agree with the Outcome of the Audit?
If you disagree with the IRS’s findings, you have the right to appeal. Your first appeal is to the examiner’s supervisor. Should you disagree with the supervisor’s ruling, your next step is the IRS Appeals Office, which is independent of the local IRS office that conducted the audit. Beyond that, you can take your case to the U.S. Tax Court.