How to prepare for an IRS tax audit in Massachusetts

Knowing how to prepare for an IRS tax audit may help people expedite the process and obtain a favorable resolution.

Based on annual statistics, Forbes reports that people had approximately one in 160 odds of getting audited by the Internal Revenue Service in 2016. Despite the small number of people who hear from the IRS, the fear of being audited is one that looms large for many in Massachusetts and throughout the U.S. This is because they may result in additional tax interests, as well as civil or criminal penalties. Understanding how to prepare for an audit may help set taxpayers' minds at ease should they receive notice that their returns are under review.

Carefully review the notice

There are two general types of audits that the IRS carries out - correspondence and in-person interviews. Each of these has specific instructions that must be followed. Thus, the first thing people should do upon receiving notice of an audit is to thoroughly review the letter to determine exactly what is being asked of them. Acting in accordance with the instructions and within the specified time periods may be essential to a helping people obtain speedy and favorable resolutions to their audits.

Gather the necessary documentation

In order to verify the deductions, income or credits that they have claimed on their tax returns, the IRS may request a ask taxpayers to present a range of records. This includes receipts, bills, canceled checks, loan agreements, diaries or logs, travel tickets, legal papers and employment documents. Organizing the documentation by year and type of expense or income may help expedite the process and reduce the likelihood for misunderstandings or errors. It is also suggested that people include a summary of the transactions with their records.

Be polite and professional

Getting audited by the IRS can be an upsetting and inconvenient experience. It is important to keep in mind, though, that becoming upset may only add to the stress of the situation. Therefore, it is advisable for people to try to keep a clear and level head. Working with their auditors rather than against them may help the process go as smooth and quick as possible.

Do not slow the process

Although it is recommended that people are cordial to the agent conducting their reviews, they should also keep in mind that they are not necessarily on their side. Taxpayers should be honest in their replies and provide complete answers to the questions asked of them. However, they should avoid over-sharing and volunteering more information than has been requested. This may only serve to cloud or delay the process.

Seek legal counsel

Getting audited by the IRS may be simply a formality for some; while for others in Massachusetts, it may lead to serious civil or criminal repercussions. Therefore, those who have received notice that their returns are being audited may benefit from consulting with an attorney. A legal representative may guide them through the process, keeping them apprised of their rights and what is expected of them.