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How to prepare for a personal tax audit

Any taxpayer will know that tax returns can be complex documents. That’s why the IRS makes sure that every detail on your tax return is accurate. Should they find a problem, they may contact you to conduct a tax audit.

 

What is a tax audit?

Because tax returns carry important financial information, it’s crucial that they’re filled out correctly. The IRS conducts tax audits to examine your tax return and verify that your income and deductions are accurate.

The IRS uses a statistical formula to put tax returns through a screening process. If your tax return stands out against the norm of other returns similar to yours, you may be randomly selected for an audit.

Reasons for a tax audit

There are a number of reasons why the IRS might conduct an audit. Some of them include:

  • Mistake or error on your form
  • Home office deductions
  • Excessive work deductions
  • Conflicting income reports

Tax audits aren’t always an indication that you intentionally made an error. You might have simply had an unusual deduction that made your tax return stand out against the norm.

Preparing for your tax audit

The IRS will call or mail you to notify you of your audit. An auditor may administer the examination in person. However, most personal tax audits are conducted through the mail. To ensure that your tax audit goes as smoothly as possible, there are several things you should do to prepare.

First, you’ll want to respond to your audit notice within 30 days of receiving it. If you don’t, you will build interest, only adding to the amount of money that you may owe the IRS.

Your notice should detail what you can expect from the audit, including what information the IRS will examine. With this information, you’ll need to gather the necessary documents, including:

  • Pay stubs
  • Receipts
  • Medical bills and records
  • Custody agreements
  • Old tax returns
  • Mortgage statements

Seek legal representation

Tax audits can be overwhelming processes. Consulting with an experienced tax law attorney can help you prepare and understand your rights during a tax audit.

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