An IRS audit can be a daunting and unpleasant experience for anyone. It can take countless hours to resolve and results in a lasting headache.
Typically, people hire professionals to help in the case of an audit, which can result in colossal bills and piling expenses. Working with an IRS auditor can require countless hours and stress. Nobody wants to deal with this.
So how can you prevent an IRS audit? There’s no guaranteed method, however, there are actions that can prevent the likelihood and protect you in the unfortunate case of one.
Here are some steps you can take to prevent an IRS audit:
Consistency
Remaining consistent with how your taxes are prepared is key to ensure red flags do not arise.
Avoid huge, uncommon deductions, claims or charitable contributions. Stay within a reasonable number and ensure you always have valid documentation to back up your numbers.
We do not recommend frequently switching tax preparers as this may cause frequent inconsistencies on your return.
Accurately filed tax returns
Ensure your tax returns are prepared accurately and filed on time.
File your taxes every year! Do not leave multiple years unfiled.
Remaining compliant with what is legally expected and IRS compliant is imperative.
Hiring a professional tax preparer
Hiring a professional tax preparer will increase the chances of your tax return getting filed accurately.
IRS rules/regulations constantly change and registered tax preparers are required to renew their licenses and remain up-to-date with all regulations to ensure compliance.
Double-check the tax preparer’s credentials and verify they are qualified to prepare your tax return.
We recommend checking their reviews and background online. Make sure your professional is someone trusted and known within the community.
Make sure you provide all the necessary documentation to your preparer.
Always review your return when they send it to you for your review. Please review and verify all information is correct prior to signing. You are ultimately liable.
Clear and organized records
Keep all relevant records and receipts in an organized format.
We recommend keeping these records for 7 years.
You may digitize these records if you prefer.
If you have a business, you must separate business and personal expenses. Mingling business and personal transactions are highly frowned upon and if the case of an audit, will likely lead to all your records getting investigated.
If you have a business, this leads to a need to have proper financial statements and records kept.
Hiring a professional bookkeeper
Some people, believe it or not, hire a professional bookkeeper for their personal funds. Although that’s great, it’s not completely necessary. However, if you have a business, you will need proper financial statements and records kept.
We highly recommend hiring a professional bookkeeper to prepare financials for your business.
A bookkeeper will ensure everything is recorded in a timely manner and have the organization needed.
Ensure your bookkeeper is qualified to prepare your company financials. Ideally, you will have someone who is also an accountant to ensure accuracy of all records.
Early on, you might be able to keep track of your records yourself, however, we highly recommend hiring the right professionals to ensure the accuracy of all financial statements used to prepare your income taxes.
PROMPT ReSOLUTION to IRS notices
If you receive any notices from the IRS, please respond and resolve them in a timely fashion. Do not leave notices unresolved for weeks and months.
We recommend double-checking the validity of these notices to ensure they are from the IRS.
The IRS will send formal mail to your address. The IRS will never call, email, or come to your home.
Please verify with your tax professional if you have any questions regarding the validity of your notice or need help resolving the notice(s). They should be able to help! This service is included with our income tax preparation fees, so we always have your back.
Sometimes getting audited is like a lottery. It could be by chance. If you are unlucky and get audited, taking the above prevention measures will protect you.
Investing in the right type of help from the start will save you down the line; both financially and emotionally as well.
Need help today? We can be the trusted team to prevent an unwanted audit and protect you upfront. Contact us today!