An IRS tax audit is an intimidating process
If you have never gone through a tax audit, it’s recommended that you consult with an attorney beforehand.
A tax audit is a serious step by the IRS. Anybody can be selected for an audit and it doesn’t necessarily mean that you’ve done something wrong. However, if the IRS wants to dig into your records you have to prepare for all scenarios.
Five out of seven people who are audited by the IRS owe additional taxes. If the audit finds severe errors in your tax records, you can receive a civil penalty on top of the taxes and interest you owe.
Usually, auditors come clueless and it’s their job to extract as many details from you as possible. Your performance during the audit is crucial. If you’re not properly prepared to handle the interview, you may end up doing more damage than helping your case. The best thing you can do is to start working on your defense as soon as you get wind of a tax audit coming your way.
You need to review your business records and accounting and clean any obvious errors you could find. If you can spot them, so will the auditor.
You must remain collected and keep your composure during the interview. The auditor may fire all kinds of questions about your business and personal life.
The sole purpose of an IRS interview is to catch you doing something wrong. The auditors are trained to interrogate you in such ways that you unintentionally give away information. They will look for clues in your behavior and cross-reference your statements to find out if you’re hiding something.
These things will give the IRS information about you. You may not think they are relevant, but the IRS excels at piecing the bigger picture from the bits you provide them with.
Does it sound intimidating? That’s what the IRS wants. The auditor can be cold, heartless and scary. It’s their job to come in and bully you until you cave in and tell them everything they want to hear.