Let’s start off by stating that this write up is Americentric in nature. I’m sure readers from other countries have their own policies and procedures when it comes paying taxes. Other folks from other countries are free to chime in as they see fit.
Income tax has made more liars out of the American people than golf. Will Rogers
As one who loves to play golf and hates to pay taxes I’m pretty sure that Mr. Rogers was spot on when he uttered those words of wisdom. I’m sure that somewhere along the way I might’ve fudged a number or two on my tax return. Early in my golfing “career” the same thing might be said for my scorecard. I wasn’t above taking a mulligan or three when it suited my purpose in order to shave a stroke or two off my round. Unfortunately, when it comes to being audited by the fine folks at the Internal Revenue Service, there are no mulligans.
Even though I’ve never been audited myself, the following are some tips to help you survive being audited should they come a calling and hopefully make the process a little less painful. But first, let’s start off with some percentages.
If you make less than $25,000 you’re in pretty good shape. The number of returns actually examined by the IRS is about .81% of the almost 59,300,000 actually filed.
If you’re in the $25,000 to $50,000 range you fare even better. The number of returns actually examined by the IRS is .58% of the approximately 27,300,000 actually filed.
If you’re in the $50,000 to $100,000 range. The number of returns actually examined by the IRS is .62% of the approximately 17,000,000 actually filed.
For those of you fortunate enough to making more than $100,000 a year the number jumps up to 1.66% of the approximate 4,500,000 actually filed.
I know it would be nice but unlike here at E2, you cannot put the IRS on /ignore. Most likely you’ll receive a notice in the mail from our favorite government agency that you’re about to be audited. You have 30 days to respond. Should you choose to ignore the notice do so at your own risk. The IRS will automatically adjust your taxes as they see fit and the next correspondence with them will be in the form of a bill. You can either try and represent yourself or hire a tax attorney to help guide you through the process. If you decide to go it on your own, here’s some advice that hight be helpful.
The audit notice should be very specific as to what deductions/items are under scrutiny. Make sure you gather up whatever documentation you have to back up your claims and bring copies to the audit. I say copies because if you turn over originals they might get lost and conveniently, the IRS cannot be held responsible for lost tax information. If that sounds like a Catch-22, it is.
Before heading to the audit, get your shit in order. This will at least make the auditor’s job easier and might score you some brownie points. Do not dump a shitload of receipts stored in an old shoe box on the auditor’s desk and advise them to “figure it out”. Nothing good can come of this.
Also, before heading to the audit make sure you replace any documentation that might be “missing”. Call for copies in advance and make sure you bring them along with you. If you don’t have the originals and can’t obtain copies chances are you’re going to be shit out of luck when it comes to the item in question.
Another word to the wise, don’t bring more than you have to. The notice itself should be specific enough to tell you what you need to bring. Why open up the door to any further questions?
Okay, now you’ve arrived at the audit armed with the documentation that was requested. It’s understandable that you’re going to be a bit nervous or pissed about having to be subjected to this.
Rule Number 1 – Don’t be an asshole. I can’t stress this enough. Yelling or cursing at your inquisitor is going to get you nowhere and physically assaulting one of then is a federal offense. It’s just not worth it to find yourself staring at some increased fines or actual prison time over a relatively minor matter.
Rule Number 2 – Don’t make chit chat. Answer only anything related to the audit itself. For instance, if the auditor asks you how your latest vacation was and you tell them that you thoroughly enjoyed your trip around the world they might, just might, deduce that you’ve earned more than you claimed. Then my friend, you’ve managed to make an already painful process much worse. Keep it to “Yes” or “No” answers if you can.
Rule Number 3 – Brush up on the tax law. It’s nice to be able to speak the same language as those that are asking the questions. It’ll also make the auditor aware that you’re not some sort of numbskull off the street trying to cheat the system.
That’s about all I have. Like I mentioned earlier, I’ve never had the unfortunate pleasure of having to live through this particular hell and pray that I never have to.