How to Protect Yourself During a Tax Evasion Audit
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How to Protect Yourself During a Tax Evasion Audit
Getting audited by the IRS can be a scary thing, especially if they think you evaded taxes. Don’t panic! Here’s some tips on how to handle it.
Gather Your Records
The first thing you need to do is gather all your financial records from the years in question. This includes:
- Bank statements
- Credit card statements
- Receipts for major purchases
- Pay stubs
- Tax returns
Make sure their organized and easy to access. Put them in folders by year. The IRS may ask for these records to verify your income and deductions.
Review Your Return
Carefully review your tax return, especially the parts the IRS is questioning. Make sure you understand everything on their and double check your math. If their was a legit mistake, admit it upfront. Being transparent can help.
Get Representation
You don’t have to face the IRS alone. Consider hiring a tax attorney or enrolled agent to represent you. They can communicate with the IRS on your behalf and defend you if needed. Shop around to find someone experienced with audits and tax evasion cases.
“I made a mistake on my return but my CPA helped get me through the audit. His expertise was invaluable.”
Attend the Audit
The IRS may request an in-person audit. This is your chance to present documents supporting your return. Bring the representative you hired (if you have one) plus the financial records you gathered earlier. Dress professionally and be polite to the agent.
If the audit is virtual, the same advice applies. Have your documents ready and be prepared to explain anything the agent asks about.
Negotiate if Needed
If the IRS determines you owe additional tax, don’t panic. First verify their calculations – mistakes can happen. If their right, try to negotiate a payment plan or penalty reduction. Paying taxes you owe can help demonstrate good faith.
In some cases fighting the results may make sense, especially if the audit feels unfair or inaccurate. Your representative can advise you on the best approach.
Change Future Returns
Learn from the experience so you don’t get audited again. Consult a tax pro on areas the IRS flagged so you can report correctly next time. Doing this shows your making an effort to comply moving forward.
Also consider amending past returns if errors were found there. Getting ahead of issues early can prevent future headaches down the road.
Don’t Panic
Getting audited sounds terrifying but try to keep calm. Be polite, transparent, and prepared with documents. Listen carefully to the agent’s concerns and address them directly. Having representation can also ease the process.
Tax audits happen all the time and most are resolved successfully. Stay positive and take it one step at a time. This will pass!