Most of us will never be audited. But when it does happen, it might feel a little scary. The truth of the matter is IRS auditors do audits every day. They know what to look for and can ask questions that you may easily answer incorrectly. Here's how you can be more prepared if it happens to you:
* Respond to the IRS in a timely manner. Do not let it get to a point that a face-to-face examination is required.
* Ask for help. Do this right away. Too many clients think the problem is easy to resolve, but inadvertently say the wrong thing or open another audit issue inadvertently.
* Know what is being asked. Clearly understanding the core question can simplify the solution. Why is the auditor asking to see your 1099s? Is it regarding a form you don't have? Is the auditor asking about your small business profits because he/she thinks your business is a hobby?
* Understand how the auditor has been trained. The IRS has certain areas in which it focuses training for its auditors. These are published in Audit Technique Guides (ATGs) and are available for review on the IRS website. The ATGs can be helpful in identifying areas for potential audits, as well as help you understand what the IRS likes to question.
Even if there's only a small chance that you'll be audited in your lifetime, it can be helpful to know how you can prepare for it if it happens to you.