- If you receive a notice from the IRS it’s important to read it thoroughly and do your research.
- The IRS isn’t always right, so you should do your own research and, in some cases, hire a professional.
- It’s important to be honest and upfront with the IRS and provide them with copies of important documents instead of the original.
Receiving mail from the Internal Revenue Service (IRS) might make your heart pound or give you instant anxiety, especially if you’ve had trouble with your finances or taxes in the past. Fortunately, not all notices from the IRS are the same; some of them only require a short response, while others require no action at all.
In more serious instances, you might discover that IRS records indicate you owe money – or that you’re being audited. Though these tax situations are certainly more stressful, there are several smart steps you can take to ensure your experience doesn’t become a complete nightmare.
Read the notice thoroughly
Kurt Avarell, the founder and CEO of Canopy, a software for tax professionals, told INSIDER that reading (and re-reading) the notice you receive from the IRS is important.
“While the notice won’t explain exactly why you’re being audited, it will say which section of your tax return is in question,” he said. “It will also indicate which records you should provide for the IRS.”
Once you understand exactly what you’re being asked for, you’ll be in good shape to save yourself time and stress while combing through documents and records.
Research before you pay
Pamela Kornblatt, the president of NYC-based Tax Strategists, told Brit + Co that while it’s tempting to pay the IRS right away out of fear, it’s best to hold off until you understand exactly what you owe.
“There is a reason that the ‘R’ in IRS stands for ‘Revenue,'” she shared. “The job of IRS employees is to collect as much money as they can, so they’re hoping you’ll respond by paying the amount in full.”
If you take time to do a bit of research, you may find that you actually owe less money or nothing at all. Even more, you should never automatically believe you are wrong and the IRS is correct, Dave Du Val, the chief customer advocacy officer at TaxAudit, told INSIDER.
You might feel tempted to ignore IRS notices or push them off to the side, but responding in a timely fashion is one of the best things you can do while you’re being audited.
“This isn’t something that will simply go away if you ignore a notice,” Chris Jackson from Lionshare Partners told INSIDER. “You’ll need to clarify and substantiate the issue at hand or cut a deal with the IRS under an ‘Offer and Compromise. In any instance, don’t ignore the IRS and work quickly so you don’t miss any deadlines.”
Kornblatt agreed that being responsive is key in handling in audit. “The longer you wait to dig into what’s happening, the more limited your options become for fighting back. Take action instead of hiding under the covers.”
Be honest and upfront
In the long run, it will serve you to be honest and upfront about the questions you’re asked by the IRS. Experts caution against being deceitful in any circumstance. “A revenue agent will dig further into your situation and drag your audit out longer if you appear to be hiding something,” Avarell told INSIDER.
On the other hand, you shouldn’t feel pressured to share information you haven’t been specifically asked for. “Stay on topic; don’t divulge all information about your last seven years of returns for no reason,” Jackson advised. “Provide the information requested and nothing more until you’re asked to.”
Make and organise copies
Having copies of all of your documents is key: It can help the process run smoothly and will provide you with concrete, matching records to reference while working with the revenue agent assigned to your audit.
“You should not give the agent any of your original records,” Avarell told INSIDER. “The IRS is not responsible for any documents lost in its possession.”
Do your best to collaborate with the IRS
Working with the IRS can be a frustrating and frightening experience. Avarell said that one of the most helpful ways to make it through an audit is to remember that revenue agents are real people who have personal lives.
“You can’t go wrong by showing kindness and recognising that they have a job to do,” Avarell told INSIDER. “If you can facilitate their job, the audit process is sure to go more smoothly for you.”
Hire a professional if you need to
“There are a lot of moving parts, notices, deadlines, and different IRS personnel that you would need to be aware of during an audit,” Jackson told INSIDER. “The best deals I’ve seen have been worked out by professionals.”
When hiring a professional to help you with your taxes, Jackson recommends a CPA who will stand by their filed return and who can offer an audit protection program.
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