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As you begin to keep your eyes peeled for your tax refund from Uncle Sam, you should cross your fingers you never get a letter from them indicating something is wrong. Sometimes we forget to carry the two or accidentally put the wrong number on the wrong line. Regardless of the reason, no one enjoys being a part of a tax audit investigation. Should they contact you, here are some do’s and don’ts on how to deal.
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DO keep your calm
Now is certainly not the time to lose your cool. You must do everything you can to keep your calm so you can have a level head about the next steps you need to take. Try not to be so negative and play out different scenarios in your mind. It will only do more harm than good.
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DON’T push the notice to the side
Just because you choose not to accept the audit doesn’t mean it’s not happening. When the IRS notifies you, pay attention. Throwing any notices you get to the side will only make your situation much worse. Even if a few years pass, they can and will come after you.
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DO look for missing documentation
Most audits deal with a particular line item or area of your tax return, which is why you need to keep all of your documentation from previous years. Get all of the paperwork you need so you can provide the necessary “evidence” that will hopefully make your audit go away.
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DON’T act too fast
While you shouldn’t shrug off your audit, you also don’t want to act too fast. Just because you receive notice on Monday does not mean you need to scramble to get something together by the end of the day. Sometimes you need a little more time to prepare your paperwork and get missing documents from a third-party.
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DO consider professional help
Did you do your taxes on your own, or did you hire a tax professional? If you’re being audited, you need to go back to the person who helped you and let them know about your situation. There’s a good chance they might be able to provide the missing piece to the puzzle, or just forgot to do so in the first place. You can always hire someone new that will lend a fresh pair of eyes to your problem.
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DO learn about the different types of audits
Not all audits are created equal. It’s important to learn more about your specific tax audit in efforts to learn more about the severity and things needed to make it go away. There are four types of tax audits: correspondence, office, field and TCMP (taxpayer compliance measurement program). While each require documentation, they will all vary in some unique way.
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DON’T neglect representation
Should you need to meet face-to-face with an auditor it’s important to have someone there in your corner. Hire a professional to learn more about your case, answer questions for you (sometimes we give up too much info) and help you keep your cool as it will likely be an emotional experience. It will be their job to make Uncle Sam realize it was never your intention to evade taxes in any way.
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Do take action
If the conclusion of your audit reveals you owe or have a “balance due,” pay up sooner than later. Unless you’re certain they’re wrong–and can provide proof–there’s no need to delay the inevitable. Don’t forget, what you owe will more than likely have penalties and interest attached to it. The longer you wait to pay it, the more of a hole you’ll create for yourself.
