How to Prepare for a Tax Audit

There can be nothing more unsettling than receiving a letter from the Internal Revenue Service claiming that the past years taxes are being audited. While auditing is a common practice and affects many Americans each year, it can be unnerving to think that a stranger is digging into personal finances and documents in order to find evidence of wrongdoing.

Whether or not a taxpayer has done wrong by the IRS, audits can expose things of which taxpayers are frequently unaware. In the event of an audit, it is important for the tax payer to take certain steps to ensure that they are protecting themselves and their families from the long arm of the government.

First Steps in an Audit

Anyone who learns that they will be audited should take the time to locate all of their financial documents. Documentation is necessary if a party plans on fighting allegations of unlawful tax preparation and to stop the auditing process before it even begins.

Some examples of important financial documents to locate in anticipation of an audit are:

  • Health Insurance
  • Medical Bills and Expenses
  • Pay Stubs
  • Previous Year’s Taxes
  • Spousal Financials
  • Property Taxes
  • Student Loan Statements

While the IRS may already have access to this information, it is possible that there may be a discrepancy in their analysis of the taxes based on missing information. Having documentation puts the taxpayer in a place to double check the IRS’s audit and make sure that they are not being subject to any unnecessary punishments or payments.

Potential Repercussions of an Audit

If the IRS finds that the taxes were prepared inadequately, then the taxpayer may receive a penalty. Usually, the penalty is to pay the portion of the taxes that is owed. In addition to this, there may be an additional fee depending on the error that the taxpayer made. If the error was seemingly an accident then the penalty is less likely to be severe than if the error was an obvious disregard for the IRS regulations.

In the most severe of cases, there may be a civil fraud penalty or criminal charges filed against the taxpayer.

Since tax audits have the potential to bring severe consequences, it is important to contact an attorney that is qualified to represent a party against the IRS. In Dallas, Texas, Scammahorn Law Firm, P.C. is available for a consultation at (903) 595-1000. Our attorneys have years of experience working on tax cases and are ready to get started on your case, today.