Best Ways to Prepare Yourself For a Tax Audit

None of us wants to face a tax audit.

The IRS is an intimidating organization and often the idea of facing them can strike fear in anyone. However, there are some things that you can do that will help make a tax audit go a bit smoother.

Maintain accurate records now.

Ultimately the IRS makes it your responsibility to keep accurate records to prove your deductions and income in the event of an audit. When you collect and organize your records throughout the year it will make it easier to prepare your return and it will help you ensure your filed tax return will be accurate. The other plus side of maintaining records is that having them will allow you to build a solid defense if the IRS audits you.

Records you should get in the habit of maintaining are: At least three years of tax returns and all related tax return materials. Accurate records of your checking and savings accounts, including checkbook stubs. Categorized receipts from all purchases and copies of your regular bills. Records of all costs to maintain property and any investments that are taxable. A journal of your deductible items that you write in at the time you pay for each item. If for any reason you do not feel capable of organizing these records yourself then you could benefit greatly by hiring a qualified tax professional to help you.

What if you have already been picked for a tax audit?

Well, you need to get yourself prepared to face it immediately. Don’t try to hide from this event. Trying to avoid the IRS will only make the situation worse.

First – Take a look at the details of your return and make sure you have a good understanding of the contents. If you did not file your return then get help immediately and start filing as soon as you can.

Make sure you organize your return so that you can support any items being questioned by the IRS. Again, getting help at this time from a tax attorney who knows how the IRS works and how to take care of these situations the right way can be very helpful. This is especially true if you are confused or you feel that the situation being brought to you by the IRS is over your head. Don’t feel ashamed to get help, it is your right to seek council and taxes can be very confusing.

Second – Understand what penalties you are facing

These are some of the common penalties the IRS may be threatening you with.

  • Interest Due – Interest will accumulate from the due date of your return (which includes extensions) until the date that you pay the cost of the penalty on any violations that have to do with fraud, negligence, failure to file on time and misrepresentation of property or asset value.  If the penalty is for anything else then interest will not be charged as long as you pay within 21 days and the penalty is under 100,000.
  • 20% penalty usually applies to whatever portion of tax underpayment was associated to misvaluation of property, negligence or disregard for the rules and severe tax liability understatement.
  • 75% Penalty often applies to serious tax underpayments that are based on fraud. If the IRS is accusing you of fraud you need to seek legal counsel immediately and realize that it will be on you to prove that the IRS is wrong.


Serious cases of tax evasion and other tax crimes can result in severe fines, the forfeiture of assets and incarceration. Avoid this at all cost. Seek help from legal counsel immediately if you are facing this type of IRS investigation.

Finally, If you have unfiled tax returns, are facing severe penalties, are being audited for business or unpaid payroll taxes or find yourself overwhelmed in anyway seek help now. Talking with a tax attorney will help you be sure of the correct steps to take in order to handle your case. Having someone on your side at a time like this will ease the stress and confusion.

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