- Bargaineering - http://www.bargaineering.com/articles -
Tax Audit Tips
Posted By Miranda Marquit On 12/19/2011 @ 12:05 pm In Personal Finance | No Comments
Nearly every lives in fear of a tax audit . The truth, though, is that a very small percentage of the population is ever audited. And, of those, most people are simply asked to clarify something, or send in documentation. For most people, an audit doesn’t involve actually sitting down with someone from the IRS to go through every scrap of financial paper that you have.
If you are one of the few that ends up going through a full-blown audit, though, there are some things to remember:
The IRS representative will meet with you in a reasonable place of your choosing. This can be at your home, but many experts discourage this. You can choose a reasonable neutral location, or you can meet at your business location for a business audit. You can also choose a time that is fairly convenient for you (although you can’t put it off indefinitely). For most individual returns, meeting in person is moot, however; most individual audits are handled via correspondence.
One of the best things you can do is get tax representation. My accountant has a policy of representing clients during an audit. If I am ever audited, I will take advantage of this service. A representative is more knowledgeable about tax issues, and can ensure that your rights are upheld. If you meet with a revenue agent in person, only do so in the presence of your representation. Discuss, ahead of time, what to say, and what not to say. While you want to be truthful, it is important that you stick only to the matter at hand, and that you not say anything that could justify a wider investigation into your tax history. A representative can help keep you on track.
You can have your representative ask the IRS to substantiate the issue. In some cases, if the IRS doesn’t have support for adjustments it is making, it is possible to resolve what you owe to a lower number. Having a representative can help you in these negotiations.
In many cases, though, if you have a representative there is no need for you to have contact with the IRS representative at all. Your representative can usually handle everything involved with communicating with the IRS.
It’s true: The better your records are, the easier it is to get through an audit. However, your records don’t need to be perfect. You don’t need to prove the exact amount you deducted , as long as you know that you incurred the expense, and that you are deducting a “reasonable” amount. This is known as the Cohan Rule.
Realize, though, that the Cohan Rule doesn’t apply in the case of entertainment and travel expenses. So, while you might be able to get away with less perfect records in the case of purchasing office supplies, your meal expenses for your business trip needs to be meticulously corroborated by records. If you don’t have them, you will owe the money to the IRS.
You have rights as a taxpayer. Make sure you understand them, and exercise them.
(Photo: bornazombie )
Article printed from Bargaineering: http://www.bargaineering.com/articles
URL to article: http://www.bargaineering.com/articles/tax-audit-tips.html
URLs in this post:
 Tweet: http://twitter.com/share
 Email: mailto:?subject=http://www.bargaineering.com/articles/tax-audit-tips.html
 tax audit: http://www.bargaineering.com/articles/how-does-the-irs-pick-tax-returns-to-audit.html
 deducted: http://www.bargaineering.com/articles/tax-credit-vs-tax-deduction.html
 bornazombie: http://www.flickr.com/photos/bornazombie/2399147591/
Thank you for reading!