Does the very thought of a tax audit make you break out in a cold sweat?
Whether you have been contacted for a business or personal tax audit, this is not something to take lightly. In fact, we strongly recommend that you never communicate directly with the IRS, if possible. Instead, let your tax attorney handle the matter on your behalf.
How to Prepare for a Business Tax Audit
The proper way to prepare for a business tax audit depends on the type of audit the IRS plans to conduct.
Typically, they ask for one of three types of audits. In a correspondence audit, they ask for clarification on a specific issue or request missing documentation. This is pretty straightforward, and assuming you provide an acceptable answer, over and done fairly quickly.
In an office audit, they ask that you come to the IRS office to answer questions. This procedure will likely involve a request for you to bring certain documents with you.
In a field audit, the auditor comes to you and has the right (within limits) to any documents related to a specific year’s filing (or range of years).
Assemble the documents they have requested and make a copy (never give them your originals). But before sending anything off to or meeting with the IRS, consult with your tax attorney. In fact, you will likely fare much better if you have your attorney deal with the IRS instead of you as much as possible.
How to Prepare for a Personal Tax Audit
The IRS deals with individual audits in a similar manner. They will reach out to you in writing to ask for clarification, or if applicable, to notify you that you are being audited.
If you had a CPA, tax lawyer or enrolled agent prepare your tax returns for the year in question, you’re in luck. Chances are, your tax professional will ask for the IRS letter and an IRS power of attorney, and that will be the last you hear of it.
If you prepared the returns yourself, call a tax attorney immediately. You’ll have to assemble all your backup for that year’s return, so remember to keep your filing up to date.
Your tax lawyer can examine your returns and backup for the year(s) in questions and potentially identify any areas that may have raised red flags. It may help on audit day if your lawyer has answers ready for any potential questions.
Remember this: The auditor does not have your best interests in mind. Be professional and polite, but as much as possible, let your tax lawyer do all the talking.
The Best Way to Prepare for a Utah Tax Audit
Don’t avoid your tax obligations, but avoid anything that could raise a red flag and trigger an IRS or state auditor’s concern.
The best way to fly under the radar is to follow these three, simple steps.
- File your tax returns on time — This may seem a little obvious, but many people don’t do it.
- Keep it all 100 percent legal — Avoid the temptation to fudge even the tiniest of details.
- Let a Utah tax attorney handle everything — The returns we submit on your behalf are professionally prepared and checked multiple times for accuracy, which means they won’t attract any undue attention.
The Froisland Law Firm provides professional tax preparation and tax problem resolution for individuals and businesses in northern Utah. Contact us today for assistance in preparing for your Utah tax audit.