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The IRS tax audit notice. Is there anything more feared and dreaded for both individuals and small business owners alike?
You filed your return, paid any taxes you owed, and breathed a sigh of relief. But, wait! You've just received an audit notice in the mail. (Note: The IRS will never call you. If you got a call, it's probably a scam.)
What should you do next? Here are a few options to consider:
1. Figure Out Why You're Being Audited.
Before you can fix a problem, you need to know what the problem is. Why are you being audited? Did you under-report income? Did you take too many deductions? The IRS notice will tell you which tax return is being audited, the specific issues or problems with your tax return, and what you need to do.
2. Figure Out What the IRS Wants From You.
Most notices will have a "What you need to do" section. Often times, the issue trigering the audit can be fixed easily by following the instructions in that section. The notice will also give you a deadline. Stick to that deadline. Or, if you need more time, contact the IRS to let them know.
3. Gather Your Records and Any Documentation the Notice Asked For.
The IRS notice will often tell you what documents they need from you. Get all those documents together to make things easier for your auditor. Also, be sure to make copies of all your documents. Don't mail in or give to the auditor original documents. You may not get them back.
4. Call Your Accountant or Tax Preparer.
If an accountant or tax preparer helped you file your taxes, they will often help you respond to audit notices as well. Your tax preparer can help you figure out where the mistake is in your tax return, and how to fix it. If the IRS made a mistake, ask your tax preparer what documentation you need to prove why your tax return is correct.
5. Respond to the Request.
Whatever you do, don't ignore the notice. If you don't respond, the IRS could make changes to your tax return, and you may owe more money. If you don't pay the balance due, the IRS could then freeze your bank account, garnish your wages, put a lien on your property, or even prosecute you for tax crimes.
6. Consult a Tax Attorney.
If you receive an audit notice and don't want to deal with it by yourself, an experienced tax attorney may be able to help. Since audits can be time sensitive, don't wait to contact an attorney.
To learn more about small business tax issues, check out FindLaw's section on Business Taxes.
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