Audits and You

You've just gotten notice that you are being audited by the IRS. Your financial affairs are about to be scrutinized. Now you have some big IRS problems.

Your first step is to scan the letter. What the IRS wants will be written in that notice, as well as other information, including the period they are auditing, which audit they are doing, and the papers they're requiring. Also, remember the date you have to reply to the IRS by. You are often given 30 days to respond.

Your number one goal in an audit is to only give the facts related to the specific period and documentation being audited. Don't disclose extra details as these may give the IRS more reasons to scrutinize you more.

These papers can help you support the information you gave on your tax return:

• Bank statements
• Cancelled checks
• Deductions claimed on the tax return receipts
• Income statement report
• Proof of payment for mortgage, property tax, donations, etc.

It may take you awhile to get all these documentation gathered, especially if you have to get some of them from other institutions, so don't wait until just before the audit to get organized.

The auditor's questions must be answered truthly while on audit. Auditors are trained to look for signs of nervousness and lying, so do not talk too much. Employ harmless statements during questioning, like Yes, No, I don't recall, I'll have to check on that, What exactly do you want to see?, and why would you like to know?

Only present the documentation specified by the IRS on the notice you received. It could cause more harm than good if additional documentation is presented. Tell them that the documents are at home if the auditor asks you about another tax period or a document that was not specified on the notice.

If you agree with the outcome of the audit, pay what you owe and consider your IRS issues over. If you do not agree with the results, you have a right to request an appeal.

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