IRS Audits Need Not Be Feared
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While taxpayers may be afraid of the auditing process, an actual audit by the Internal Revenue Service can be handled in many ways. NY1's Money Matters reporter filed the following report. The idea of being audited may conjure up images of a shadowy government agent in a trench coat knocking on one's door. In reality, taxpayers are more likely to be contacted by mail than by a visit. Still, unless it contains a check, getting an envelope from the Internal Revenue Service can give people goosebumps.
"They go through all sorts of mental aggravation of, 'What did I do wrong? How could I have done something?' And, quite frankly, you may not have done anything wrong," says RSSM & Company certified public accountant Jay Safier.
When why would taxpayers merit extra scrutiny? Tax experts say it could be a simple mistake, like transposing one's Social Security number, or it could just be the luck of the draw.
"There are different things that can trigger an audit, or the IRS can just throw a dart at a board and land on your name," says H&R Block tax professional Wilma Hayes. "So, there's no guarantee that they will audit you. There's no guarantee that they won't."
However, experts say this year chances may be a little higher, thanks in part to the national deficit.
"Congress kind of has two options. They can raise taxes or they can try to close the tax gap," says WalletPop tax expert Kelly Phillips Erb. "It's a lot more appealing to voters to say, 'We're just going to collect what we're not receiving,' rather than raise taxes, and they're doing this by increasing audits."
The process can work in one of two ways. The first variety, a paper audit, is handled entirely by mail.
"They send you a letter saying, 'We would like to see some additional information for this child or dependent or this deduction.' If you have that, you simply send it back," says Mark Steber of Jackson Hewitt Tax Service. "Send it back timely. Don't wait until that third or fourth notice, but send it back.
The other variety is an in-person audit, which can be done at one's location or an IRS office. In either instance, taxpayer can either represent themselves or authorize someone else to act on their behalf.
"If it's done by a professional who's had experience, it could be time-saving in the long run, and certainly, would relieve the taxpayer of the pressure, the worry," says Safier.
The taxpayer, not the preparer, is liable for what is in the return, so one should carefully go over everything in the tax return carefully before signing it. That way, taxpayers will have nothing to fear in an audit.
"Basically just file a complete, correct return and keep your receipts," says IRS spokeswoman Dianne Besunder. "In that case, if the IRS at a later date questions something, it'll be very easy for you to come through with the documentation you need."