Keeping Tabs On Money

As audit firms gear up around the nation to handle government audit loads, taxpayers are quaking in their boots. Nobody wants to go through an audit, especially when you just received a refund. Thankfully, audits are not as random as being selected for a pat-down at the airport. In the event that you do receive a notice that you have been selected for an audit, here is how to prepare for it.

Get All of Your Documents Together

An auditor is not going to be satisfied with just this year's documents. You need documents from the last ten years! This is why the old rule of thumb for what to save and what to throw away exists. Ten years of tax documents are standard for an auditor to get a really good idea of how you file your taxes and the kind of money you make/have made. It also proves that any jump in income you had is completely organic, and not a result of illegal activity. If you do not have ten years' worth, the audit notice usually gives you enough time to track down any missing documents before you meet with the auditor.

Do Not Be Nervous 

Being audited is an uncomfortable feeling, to be sure. However, when you have nothing to hide and nothing to cover up, there really is no need to be nervous. Usually, an audit occurs when something out of the ordinary appears on your taxes (e.g., you claim a really big credit or deduction than usual, your refund is larger than your annual income, etc.). Once the auditor sees why this happened, the problem is easily fixed or the issue is dropped completely. The auditor files his/her report with the government, and you are fine.

Ten Years Is a Lot to Remember

Most people cannot remember what they did last week, let alone ten years ago. If you cannot remember why you claimed "x" dollars in medical bills in 2008, that is okay. The auditor understands and will help you try to sort it out. Punitive measures only come to those who are unwilling to sort things out with the auditor, or who are clearly trying to cover things up. Most auditors can recognize the difference, and they will not try to trick you or trip you up during your tax audit discovery process.  

For more information, contact your local audit firm today.