Just the thought of being audited causes most people to shudder.
And even though audits are at a 14-year low, there’s still a chance that the IRS could send you that dreaded letter.
If you find yourself in this situation, now is not the time to be scared. It’s time to be smart.
There are many reasons why the IRS may want to take a closer look at your taxes. Being equipped with the right strategies and support is crucial to having a favorable outcome of your audit.
We’ve highlighted 5 important reasons why you should stop worrying about being audited.
1. Being Audited Doesn’t Mean You’re In Trouble
It is natural to assume that an IRS audit is the result of some negligence or fraud in how you reported your income. That is often not the case, however.
The IRS selects a random percentage of taxpayers annually to audit. You may well just be in that category.
In many cases, the IRS just wants to take a closer look at the information you submit. The more complicated your tax situation is, the more likely it will be under scrutiny.
2. Be Prepared, Not Worried
Plan for an audit before it happens by keeping excellent records.
Have all your paperwork ready and organized. Make copies of the necessary documents. Never give the IRS your originals. If something gets lost — and it probably will — you’re still responsible for supplying all the required information to them.
Before you ever get the dreaded audit letter in the mail, be ready to account for deductions, losses, or any abnormalities in your taxes for the last few years minimally. Audits typically cover the prior 2 or 3 years financial information, but may date back further.
If you realize that you’re missing a crucial document, be diligent in tracking it down from your bank or wherever necessary. The better prepared you are, the less you need to worry when you’re being audited.
3. You Can Fight Back
You have options for how to respond to the IRS’s audit notice.
It is your right to be represented by a tax professional through this process. Don’t run the risk of facing the government alone.
You also have the option of requesting a delay in the process, giving you time to gather appropriate documents that support your case.
If there is an issue with the auditor him or herself, you may be able to request a different one. It’s important that you’re comfortable with the process so you don’t miss any opportunity to defend yourself accurately.
If the results don’t go as you’d like, you also have the right to an appeal.
4. Worrying Can Lead to Poor Decisions
The success of your audit depends not only on your prior tax choices but on how you deal with the government. Don’t let worry cause you to withhold information, avoid communicating with the IRS, or behaving poorly when you do.
Remember that an auditor is a person too. Whether you agree with the process or not, it will work better with open cooperation.
Even if you’ve made a mistake, owning up to it and working with the IRS is in your best interest.
5. The Process May Improve Your Business
While being audited is never fun, it can be helpful for you or your company. If you treat the process as an opportunity to grow, it can even be useful.
If you own a small business or are self-employed, you must be extra careful in what you claim. Avoid sending red flags to the IRS unnecessarily.
Going through an audit may reveal areas of your operations that you’ve either neglected or need to correct. Use it to make you a better businessperson moving forward.
Be honest with yourself and the auditor; the process will run more smoothly. You’ll also reduce your risk of being audited in the future, having learned from your past experience.
Take the Stress Out of Your Taxes
For a lot of businesses, filing taxes is an undesirable chore. The prospect of being audited only makes it worse.
The process doesn’t have to be full of worry.
Our VTax system has streamlined the process, making it simpler and more user-friendly. And it includes audit assistance, so you’re covered on all sides.
We’d be happy to answer your questions about it or any of our other financial services. Request a free quote today and take all the worry out of your taxes.