Preparing For an Income Tax Audit
Published by Sean M. Lightfoot on Tagged FinancialAn IRS audit will be less stressful if you prepare for it in advance.
Have you been notified of an upcoming IRS audit? Or are you just preparing for the worse? Either way, it is in your best interest to be well prepared and organized. In some cases the IRS will accept verbal explanations for smaller deductions($50 or less), but documentation of larger deductions ($51 or more) should be well documented with an explanation. Before the audit date, review the tax return in question (with the tax preparer or a tax professional if possible) so that you can locate the documentation and recall each and every expense and income. Be ready to explain how your tax preparer came up with the amounts within the return. If possible, research the tax laws so that you can legally show your right to claim the deduction or benefit that you claimed on your tax return.
Organization counts
Be organized. The IRS will be more understanding towards an organized individual on questionable items. Also, throwing a stack of documents and receipts on the desk in front of the auditor forces them to dig through information leaves room for assumption.
What to bring to the audit
All of the following items can help your audit go smoother.
- Bank Statements, Canceled Checks and Receipts
- Electronic Records
- Books and Records
- Appointment Books, Logs and Diaries
- Auto Records
- Travel and Entertainment Records
- Expenses for Renting or Buying Property
Never make the IRS representative guess. Keep accurate records and show documentation for all items within the tax return.
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