An IRS audit is not a pleasant experience for anyone. It may even be a cause of panic for some individuals and businesses. It is difficult to accept the notion that your tax return was unacceptable to the auditor. All this while, you believed filing the tax return is your annual and final responsibility. But an audit letter is enough to shatter your beliefs.
It may take a while for you to figure out why an IRS chose to audit you. Once you have read and understood the audit letter thoroughly, it is time to brace up and face the reality of an IRS audit.
Facing the IRS audit for the first time? You may be dreading the imminent investigation and inquiries. Be careful, not to make these 5 mistakes during an IRS audit.
- Not treating the audit as your top priority
If you think you can deal with the IRS audit letter after you are finished with the client’s commitments for this week, you are making a huge mistake. You must treat the audit as urgent and start preparing a response with immediate effect.
Failure to respond within the stipulated time can lead to penalties and charges. The tax auditor may suspect your intentions in the absence of a credible reason for the delay. You may even be denied an opportunity for explaining your case and defending your position altogether.
- Preparing a hasty response
Sending a prompt response doesn’t mean it can be rushed and negligent. You need to be particularly careful when the IRS audit seeks documents and information. If you supply more information than required, the auditor may take advantage of the situation and find more issues to probe.
If you hand over insufficient or incomplete information, the auditor may call for additional documents.
Your response should be clear and succinct. All supporting documents should be well organized. The response should show your willingness to cooperate in the audit process and inquiry.
- Submitting false information
Any information you provide should be accurate; free from mathematical errors and window-dressing. It should be a true statement of facts and figures, which can be supported with proof.
Any attempt to cover up liabilities with false information is treated with strict action under the US tax laws. If you submit false records or misinformation, you may even face criminal charges.
The law is so firm regarding misrepresentation and misinformation that even honest mistakes can lead to dire consequences.
- Neglecting the room for compromise
While the IRS audit may be imposing heft liabilities on you, there is a scope for compromise. You may opt for the IRS program that allows you to pay less than the actual amount of your tax liability. Only a few people may qualify for the benefit, hence eligibility of each case has to be analyzed.
Smart negotiations can help you close a settlement agreement. You may also get some advantage if you can manage to present a logical explanation and reasoning supporting an interpretation in your favor.
- Not hiring a qualified tax attorney
Your audit case may not be straightforward. If it was just a matter of supplementing financial records, any individual may have dealt with it. But when the case involves complex legal issues, underlying interpretations and heavy penalties, a qualified professional should be consulted.
If you make the mistake of ignoring the importance of legal advice from a tax attorney in the first instance, the IRS audit may turn into an overwhelming and ongoing legal battle.
What should you do?
If you are facing an IRS audit, we strongly recommend that you seek immediate tax audit help. A professional tax attorney is an expert at handling all kinds of tax audits and can offer sound legal advice tailored to your individual case.
