3 Tips To Help You Survive Your Tax Audit

Written by on July 27, 2013 in Money - No comments | Print this page


tax papers calculatorThe IRS had just sent me the dreaded notice letter, “Your taxes are being reviewed.”

If you’re reading this, you’re probably in the same boat. Don’t do what I did, which was to spiral into a panic attack to end all panic attacks.

Take a breath.  Count to ten.  I know what a huge relief it was for you to just get your taxes in on time, and that you were hoping that you wouldn’t have to look at them for at least another 9 months or so.

However, there’s a chance that your tax review may not even be too serious.  If you used a tax professional or a certified public accountant to prepare your tax return, now is the time to give them a call.

When I received my letter I hadn’t used a CPA and wasn’t even really sure what it meant for my situation, so I had to do some research.  Let’s go over the possibilities.

Types of Tax Audits

  • There’s a good chance you won’t have to deal with an intimidating IRS worker wearing a suit and carrying a briefcase.  Certified public accountants will tell you that the more likely scenario is that you will be asked to communicate with them through mail.  Perhaps you left some information out of your tax return, or, you may need to send additional information to help them clarify items on your return that they have questions about.
  • If you file an individual or business return and an auditor requests a meeting, this is a little more complex.  It could still be a random, simple audit, but it may also be a more complex kind of audit that can last for several months.  At this point it is a good idea to contact a trusted CPA firm.  If you don’t have one, ask around.  After my audit, I started using a CPA from Burkett Burkett & Burkett, who I was referred to be a close friend who had used them for years.  My CPA was able to explain what I did to the auditor, and explain the situation to me clearly so that I understood the situation I was facing.

Still freaking out?  It’s okay, we’re not done here.  Let’s talk about some of the steps you can take to make sure your audit goes smoothly.

How to Handle Your Tax Audit

  • Respond to the request in a timely manner.  It’s normal to feel alarmed, but you don’t want to put your notice on the backburner for too long.  I’m a procrastinator by nature, but when I’m dealing with something that bodes impending doom, I do more than just procrastinate. I try to push it back in the deepest, darkest corner of my brain, cover it with dust and cobwebs, and never look at it again.  You’d be amazed to hear that sometimes that strategy works, but not with the IRS. They will find you, and ignoring them will make matters much, much worse.  If you’re having trouble confronting the issue, call a CPA.  They can handle some of the tough stuff for you so that it doesn’t wreak havoc on your fragile nerves.
  • Gather your paperwork.  You will likely need to prove that what you stated on your tax return was accurate by offering up certain documentation.  If there is a company you use for accounting services throughout the tax year, there is a good chance they’ll have everything you need on file for you.  I didn’t use an accountant at the time, but was very lucky in my situation because I had recently begun to keep (fairly) good track of my paperwork.  There were a few things that I didn’t have on hand, but I was able to track down from the parties that issued them to me.  As a general rule, a CPA would recommend that you hold onto your paperwork for 3-4 years, even after your taxes are filed, as 3 years is normally the statute of limitation for your tax return. This can vary by your individual situation though, so be sure to consult with someone if you aren’t sure!
  • Gather your patience.  Working with the IRS can be a trying process, but no matter how nervous, defensive, or exhausted you may be feeling, you have to appear composed.  If you’re the type of person that likes to get sassy with people that are in positions that many don’t regard very highly (debt collectors and the like), you’re going to have to make a special effort here.  Go ahead and prepare yourself for the process, which will most likely feel long and arduous.  Don’t take out your frustration on the auditor – they are just doing their job.  Being kind and courteous can go a long way here.  Be transparent, and a good communicator, but don’t over-share either.  You want to give the auditor enough information to work out their questions, without giving them so many documents they need to poor extra hours into deciding what is relevant.

Full disclosure, I must say that my audit ended up being pretty simple and straightforward in the end, but I was still anxious through the whole process.

You can’t be sure what the outcome will be until you and your CPA complete your audit.  At that point, you may be asked to pay a fine, and you’ll generally be given about 30 days to do so.

The auditor’s decision doesn’t have to be the final answer; you can certainly appeal it, but that process will require a tax attorney and can be long and costly.

Instead, you may want to consider using that money and effort to hire an accounting service to monitor your finances throughout the next tax year.  Because, above all, you want to learn from your mistakes!

Do what you can to avoid future audits, and you’ll be preventing future headaches in the process.  You’ll sleep better AND your Tylenol bill will be lower!

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Aubrey Johnson is a freelance blogger whose writing can sometimes be found at Charlotte Business Revews.


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