For taxpayers, there’s no worse news to get than news of an impending audit. Audits aren’t known for being kind and easy to get through, even in the best situations. Still, if you’re being audited, there’s nothing you can do about it.
Well, actually, there is – you can prepare. Knowing some tricks and acting quickly can minimize the amount you’ll have to pay when an audit happens.
Here are a few tips to help you get through a personal or business audit.
1. Stall. It’s usually to your advantage to put off the audit as long as possible. This gives you more time to prepare documentation and get ready for your auditing session. Ask for more time early and often, and actually use the time. Don’t sit on your hands.
2. Consult a professional. If you didn’t file your own taxes, ask the accountant who prepared them to handle your audit. They know more tricks and loopholes than you do. They’ve been through this before. You should also consider hiring a tax professional if you prepared your own taxes. This is especially important if you’re not sure how audits are handled. The more serious the situation, the quicker you should turn to a pro.
3. Don’t give any information to the auditor. Or, rather, only give them the information that they ask for. There’s no sense in telling them anything that they might use for more leverage. Don’t bring documents for any year except the one being handled in the audit. Guard your speech. Don’t admit to anything, but be compliant. Remember that the auditor is a person, and they can be annoyed. Tell them what they need to know, but nothing else.
4. Get your documents in order. In an audit, you need to prove that every deduction you made was justified. You’ve also got to show that you submitted the correct income. Finally, if you used any tax credits, you have to show that you deserved them. This requires quite a bit of documentation. Gather everything related to the tax year in question. If you can’t find something, track it down to its source. Get your accountant involved.
5. Have the audit done at the auditor’s office. This is better for taxpayers than conducting an audit in your own home or at your business. Again, it’s about not giving them more information than they need. You don’t want an auditor scrutinizing the very room you’re sitting in.
6. Be prepared to pay. Most audits don’t go the way of the taxpayer. Otherwise, the government wouldn’t do them. You’re probably going to have to pay out, so be ready. It’s usually easier to negotiate the terms of your payment than the payment itself. Also, be aware that you have the right to contest the final decision of the auditor. If you decide to do this, speak with the auditor’s manager, not the auditor himself.
Nobody likes an audit, but if you’re prepared, they’re not the worst thing in the world. Read up on your rights, and contact a professional when things get tough. You should be able to minimize the tax payment you owe if you think things through carefully.