7 Tips for Preparing for an IRS Audit

Did you know that “forosophobia” is defined as the fear of taxes? If you suffer from forosophobia, know that you are not alone.

Many Americans dread tax season. Just the thought of an audit from the IRS is enough to drive someone mad! What if there was an easy way to put an end to your greatest fear?

Preparing for an IRS audit does not have to be anxiety-inducing. Read our article to learn all about the top 7 tips for preparing for an IRS audit!

1. Check Your Mailbox for a Tax Audit

The IRS will contact you by postal mail services to inform you that you have are due for an audit. 

Make sure that your address is up to date at your local DPS office before tax season begins to ensure that you receive the notice on time.

Audits are likely to arrive during tax season, however, it is always best to prepare to receive an audit at any time.

There are multiple ways that you can receive an audit. If you are the leader of a large organization, business, or corporation then you are subject to frequent tax audits.

However, anyone can be randomly selected for the audit process by the IRS. A system of computers randomly generates an ID for your audit so don’t take it personally!

If you receive a correspondence audit then you should expect to receive more mail from the IRS in the near future.

If the IRS is not able to contact you through the postal service then it is possible that they will have a representative contact you on behalf of the IRS.

This person will be responsible for auditing your financial history and will ultimately determine the status of your audit throughout the process. 

Violating your tax obligations or ignoring the IRS for extended periods of time can result in heavy fines and even imprisonment. 

2. Collect Your Receipts for Tax Season

If the IRS has sent you a letter in the mail then there is no need to panic. Now is the time to gather your financial documents and receipts as quickly as possible. 

The amount of receipts that you will need to provide the IRS depends on how you file your taxes. If you work for a business or corporation then they might be able to assist you with the auditing process.

However, if you are self-employed then you will be liable for providing your own financial information.

Being self-employed requires you to keep track of your expenses in order to receive reimbursements from the IRS. 

This means that business expenses that you personally funded can be deducted from your taxes each year. That being said, it is always a good idea to keep track of both physical and digital receipts! 

This is especially true for large purchases or any amount that you plan on deducting from your taxes, regardless of your employment status.

3. Overprepare for Your Tax Preparation

There is no such thing as being overprepared for tax season! The biggest tip for preparing for an IRS audit is to have access to as much information as possible.

If you suspect that the IRS wants to audit your income, expenses, or deductions then create a game plan that you can follow once the audit arrives in your mailbox.

Include a list of phone numbers, personal documents, and receipts in your IRS audit strategy. You may need to communicate with past bosses, financial advisors, and lawyers. 

It is also a good idea to have a working computer nearby. Storing your files digitally is the best way to keep track of your financial records.

If your paper files are ever misplaced, you will be confident in your digital storage solution come tax season. 

If you expect to be audited soon, then contact your legal advisors to let them know beforehand. This will help the entire auditing process run smoother and give everyone plenty of time to prepare.

4. Don’t Be Afraid to Ask for Tax Help

The last thing you need is to be stressed out by taxes during the start of the new year. If maintaining your financial record becomes too big of a chore then ask for help!

Hiring a tax consultant can help save you time and money during tax season. A tax professional can also help you construct an appropriate strategy if an unexpected audit arrives in the mail.

If you are already on good terms with your lawyer then they too can help you prepare for a conversation with the IRS.

Being upfront with your finances is the best way to get through the auditing process. Always look for professionals who are able to filter through your persona information in a discrete manner.

If you are unable to enlist the help of a tax professional in person then there are plenty of virtual assistants that are waiting to help you as well.

Virtual tax solutions can help remind you when payments are due, to store a copy of your recent receipts, and how to best prepare for an audit from the IRS.

5. Keep Your Personal Documents Nearby

The IRS will need to verify your identity in order to get the audit process started so make sure to have all of your personal documents nearby.

These personal documents include your social security card, birth certificate, driver’s license, and more. 

Depending on the reason for the audit, the IRS may require more information such as proof of income. It is a good idea to prepare as many documents as possible to avoid a lengthy auditing process. 

Storing encrypted digital copies of your personal documents can help you access them when you need them most.

Remember to never share your documents with anyone who is not an official IRS professional. If you are personally contacted by an IRS representative then they will provide you with their official credentials. 

The IRS may require specific documents if you are married, own your own business, or have children. 

Be sure to keep all of the paperwork and receipts in regards to any dependents that you claim on your taxes as well.

6. Seek Legal Help When You’re In Too Deep

Did you receive your first audit from the IRS? There is no need to panic or become overwhelmed. 

If you feel flustered by the thought of an audit or don’t know where to begin then the best course of action is to seek legal aid.

The worst thing you can do is ignore the IRS audit or attempt to lie about your financial situation. This can lead to heavy fines or worse in the long run.

The best course of action is to gather as much information as you can then contact a professional when you begin to feel out of your depth.

It is important to note that the IRS may request that you send them specific documentation by a certain date so be sure to schedule the auditing process into your calendar!

It is a good idea to open a line of communication with your IRS representative so that they know when to expect your documents and what format they will be receiving them in.

7. Remember You Can Always File an Appeal

Preparing for an audit from the IRS? The process does not have to be as stressful or complicated as you think.

An IRS agent does their best to handle your case with care, however, to err is human. If you feel like your audit was handled poorly then it is possible to request an appeal for your case.

Keep in mind that simply filing an appeal does not erase the audit. In fact, filing an appeal is an even lengthier process that will require more time and paperwork.

However, remembering that an appeal is always an option after the auditing process can help you stay calm while you are being audited. A tax audit defense can save you time and money in the long run.

Do the best you can to handle the auditing process with accuracy and honesty. This will help you prevent any bumps in the road in the future. The appeal should only be filed if necessary.

Ready to Prepare for Your IRS Audit?

Since you know all about the top 7 tips for preparing for an IRS audit, are you ready to begin the auditing process for yourself? 

Remember, having all of your essential documents nearby will help the process run smoothly. Plus, tax help is always a phone call away. Good luck!

If you are still in need of money motivation or are curious about the latest lifestyle tips, read our other blog posts to become inspired.