People fear the word Audit. It brings up thoughts of the IRS and being under a microscope. There are 4 things to remember during an IRS.
1. The IRS will inform you what years the audit will cover.
An audit will cover certain open tax years unless you never have never filed a tax return. If you have never filed a return, then every year is an open tax year and anything is fair game.
2. The IRS will tell you where the audit will take place and the time.
The audit will normally take place at the local IRS revenue office. If you have a business, the audit will sometimes takes place at your office. However, it is better for the audit to take place at third-party location such as the tax preparer office. Why you might ask.
The reason to recommend the audit at a third-party location is that the tax preparer will be able to assist you during the audit using a power of attorney, answer questions, and represent you during the audit. It also gives you time to put together the tax documents that is being requested.
3. The IRS will provide you with a list on the form for what is needed during the audit and when the documents. The majority of the time, the IRS needs additional information to determine if you are treating a revenue or expense correctly on your tax return.
4. The IRS will either close the audit without changes or the audit will make changes to the return.
Audit doesn’t have to mean being under a microscope. Audits can be short or they can last a while. It depends on the what the IRS is auditing and the number of years. The Internal Revenue Code doesn’t always make sense when it comes to tax preparation. Not all 1099s are the same. Depending on what the 1099 is where you report the income on the tax return. Just remember, at end of the audit you will be able breathe easier.
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