Do I need to be afraid of an audit?
Don’t let fear drive your decisions: Audits aren’t the end of the world.
It’s a slow Saturday morning with steaming coffee and fresh pastries. You forgot to check yesterday’s mail, so you stroll to the letterbox, unfazed. Without warning, your weekend is ruined: Sticking out of the mailbox is an official-looking letter from the IRS. Your heart drops, your mind races, and suddenly, you’re bracing for the worst.
A dreaded audit has arrived.
Facing an IRS audit can be a daunting prospect, but an audit doesn’t have to be a nightmare. Instead, with the right mindset and preparation, an audit can be just another step in ensuring your financial house is in order.
Audits: Why?
Audits are not meant to punish; they serve as a cog in our tax system, ensuring fairness and accuracy for everyone. The IRS conducts audits to verify that taxpayers have reported their income and deductions correctly, yes, but with the goal of maintaining the integrity of the tax system.
Just because you were selected for an audit doesn’t mean you did anything wrong. Audits can be random, or they can be triggered by specific factors, like discrepancies in a tax return. But rest assured, they don’t automatically indicate wrongdoing: Getting audited doesn’t mean you committed tax evasion or fraud.
Many audits result in no changes to the taxpayer's return at all, and some even lead to refunds if errors in the taxpayer's favor are discovered.
Audits: What to expect
Audits are conducted within a specified timeframe, and you’ll receive clear communication from the IRS explaining the process and any proposed adjustments. Remember, an IRS audit is structured and governed by rules designed to protect your rights—you have the right to representation during an audit. You should also provide documentation and explanations to support your tax positions.
And, of course, upon receiving notification of an audit, your tax preparer should be your first call.
While the prospect of an IRS audit may seem intimidating, it's essential to approach it with a level head and confidence in your tax compliance. With proper preparation and understanding of the audit process, you can not only navigate audits successfully, but emerge on the other side knowing your tax affairs are in order.
