The
IRS will audit over 1,000,000 individual tax returns this year. Although that represents
less than 2% of all returns filed, this is little consolation if your return is among
those selected for audit. But with proper preparation and planning, you should fare well.
The
purpose of the audit is to verify items reported on a tax return. The easiest way to
survive a tax audit is to prepare for one in advance. On an ongoing basis you should
systematically maintain documentation – invoices, bills, cancelled checks, receipts
or other proof – for all items to be reported on your tax return. Keep all your
records in one place and hold on to your calculations.
The
government normally has three years within which to conduct an audit, and often the audit
won't begin until a year or more after you file your return.
The
scope of an audit depends on the complexity of the return being examined. A return
reflecting business or real estate income and expenses is likely to take longer to audit
than a return reflecting only salary income. You can facilitate matters by having the
necessary records arranged in an orderly and systematic fashion for presentation to the
IRS agent. The typical IRS agent is experienced and knows his job. Trying to outsmart the
agent or sidestepping questions is likely to create friction and raise suspicions in the
agent's mind.
Representation. Even if you prepared your own
return, it is often advisable to have a tax professional represent you at an audit. Your
representative knows what issues the IRS agent is likely to focus on and can prepare
accordingly. More importantly, a tax professional knows that in many instances IRS agents
will take a position (for example, to disallow deduction of a certain type of expense)
even though courts and other authority have expressed a contrary opinion on the issue.
Because the representative knows and can point to the proper authority, the IRS agent may
be forced to throw in the towel.
If
you are facing a tax audit or simply want to improve your recordkeeping, my office stands
ready to assist you. Please call to set up an appointment to discuss this or any other
aspect of your taxes.
Very
truly yours,
J.
Briscoe Gassaway III, CPA
Fax (252)443-0554
E-mail
cpa@bunchcpa.com