If you recently received a letter from IRS, there are a few important steps you need to take to protect yourself.
While IRS will occasionally audit businesses randomly, they usually audit an individual or business because your tax return contains an error or a transaction that is inconsistent with other businesses in your industry. Our San Diego IRS attorney explains what steps you should take to ensure you are protected.
Once you receive a notice that IRS intends to audit you, here are a few things you need to do:
- Find Out What Part of Your Tax Return Is Being Audited.
Many times, IRS will only question certain sections of your tax return, such as how you calculated and reported your gross income. This is especially true of self-employed individuals or business owners who are majority owners.
- Gather Your Documents To Prove Items on Your Tax Return.
Once you know the reason that triggered your audit, you need to be able to provide documents to verify your income, expenses, or other transactions reported on your tax return. There are alternative methods to establish your position if you lack direct proof; however, it is important to reach out to your vendors, banks, and other individuals and businesses who have records that are useful in your audit. Banks generally retain your records (i.e. bank statements, canceled checks, etc) for seven years. Businesses that you have done business with generally keep transaction records for 3 years.
- Don’t Ignore the IRS
While you may be tempted to ignore the IRS’ attempt to reach out to you, not responding by the specified deadline will make matters worse. If you do not respond to an audit notice, the IRS will eventually close the audit and assess your taxes based on assumptions the Revenue Agent made. IRS can also contact third parties (i.e. your neighbors, business partners, vendors) who have information useful in your audit.
- Call an Experienced IRS Lawyer
Having an expert by your side to prepare your legal defense, review your documents for potential issues, and handle all discussions with IRS will take a burden off your shoulders and can improve your chances of a successful audit resolution. Remember, anything you say or communicate to IRS can and will be used against you.
If you face an IRS tax audit alone, you are placing your business and assets at risk.
The Budget Reconciliation Act will re-fund the IRS with audits making up the lion’s share of the way the IRS intends to make back that investment in the Government Department. With the right financial and legal experts at your side, however, you can successfully navigate this complex process. Once you have received notice of an audit, contact our San Diego IRS attorneys! We can investigate your audit and determine your legal and business options.
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