Everything You Need to Know About a Tax Audit

For many individuals or business owners, the thought of a tax audit is enough to strike fear into their hearts. You might believe the dreaded audit has the ability to take up a great deal of your personal or business time, or even get you in serious trouble with the Internal Revenue Service. Fortunately, a tax audit is rarely the nightmare that most people think it will be. However, audits can take up valuable time and be an inconvenience. It is also possible that an audit can be problematic if you don’t take the proper steps to protect yourself. The following are tips some from Los Angeles tax attorneys, which may help you get through a tax audit with minimal impact.

Don't Panic

First off, when you find out that you’re about to be audited, stay calm. The chances are that something triggered an audit with the IRS during your tax preparations, such as a significant change in your reported income. An IRS official’s job is to determine if you filed your taxes correctly, or if you are withholding income or trying to get around tax regulations. During an audit, the auditor will go through your financial information with you and ask you questions about your income and tax filing.

Keep Accurate Records

One way to reduce the stress and hassle of an audit is to make careful record-keeping a regular part of your routine. Save important receipts that you’ll use in your tax reporting, such as items purchased for business or bills that qualify for deductions. Keep your tax reports for at least the past seven years on file, either in hard copy or in your computer. If you don’t have complete information, just make a point of gathering the items you’ll need and being as accurate as possible. You may need to contact numerous businesses to request copies of bills or receipts that can help you in your audit.

Be Smart During the Process

During your audit interview, you may be tempted to be overly friendly with the auditor in order to make a good impression. While the official may be personable, he or she is not your friend. It is the auditor’s job to find discrepancies in your tax filing, whether intentional or accidental. Keep conversation to a minimum and only answer the questions you are asked. Request that the interview be held at a local IRS office, rather than at your business or home. You may wish to bring your tax preparer or a tax attorney to the meeting with you.

Contact an Attorney

Despite the best record-keeping and precautions, an IRS tax audit is often nerve-wracking and time-consuming. You may not know what to expect, and being nervous, inexperienced or unprepared can end up costing you. It may be in your best interests to seek counsel from experienced Los Angeles tax attorneys to ensure your rights are protected. The chances are usually good that you’ll come through an audit intact, but it is best not to take any chances and to have a professional on your side.

When it comes to your taxes, it is important to know where to turn when you need assistance. Hiring an Orange County tax attorney or Cpa can benefit you, but it is important to know the differences between the two