Many people live in fear of being audited. If you’re prepared for an audit, the process doesn’t have to be a painful one.
“Anyone can get audited. You can, I can as a CPA,” says Michelle Swenson, CPA (certified public accountant). “I’m as much under the radar as anyone else is. That’s why I think it’s so important to save all those documents pertinent to your tax return.”
During an audit, you’ll have an easier time proving you’ve been honest on your tax return if you’ve saved your documents. People who are self-employed and file for a lot of deductions are red flags when it comes to audits.
“The IRS (Internal Revenue Service) tends to look at those people because they feel that people tend to estimate those amounts rather than have the actual support,” Swenson says. If you own your own business, you should keep all of your receipts for anything you claim as a deduction. That will protect you if you go through an audit.
The IRS constantly changes its audit formula and looks for new people or businesses to audit, Swenson says. So what should you do if the IRS comes knocking at your door wanting to audit you? Swenson advises her clients facing audits to call an accountant or a CPA.
“CPAs represent people during IRS audits all the time. I do not recommend for you to represent yourself,” Swenson says. “You’ll be dealing with an IRS agent. There are several meetings and processes under which the IRS looks at your supporting documents and I feel it’s very valuable to have a CPA represent you throughout this process.”
An audit doesn’t necessarily mean that you owe the IRS money. As long as you keep your records organized and are filing your taxes honestly, there’s no reason to fear an audit.
“You know it’s also possible that they could find something that could go the other way and maybe you overpaid,” Swenson says. “I don’t think it’s that common but it is possible. Anything’s possible.”
With the right help and organized records, an audit can be a simple, painless process.
Published: June 30, 2008