IRS Audits- A Nightmare to all Tax Payers

Though the Internal Revenue Service (IRS) allows taxpayers various means to save on taxes, it is the duty of the payee to keep precise records to the deductions in the audit. Organizing the tax records all through the year will make it easy for you to prepare your tax return and reduce the chances of errors. It will also allow you to build your defense if the IRS seeks to dispute your return. Here are a few best practices that any tax payer must follow to defend themselves against IRS disputes.

1.   Maintain records for at least three years of tax returns
2. Categorize your receipts from all purchases throughout the year
3. Maintain your checkbook stubs
4.  File every bill in organized folders
5. Track the cost basis for all taxable investments
6. Journal deductible items as and when they occur

You may be slapped with penalties depending on your nature of underpayment.

In case of serious under payments resulting from fraud, you may be slapped with 75% penalty.  For tax violations and more serious case of tax evasion, the person could be convicted to prison. In toto audits are unpleasant but you need not dread them if you have kept the financial records organized and up to date.

To learn more on the importance of Pre-planning an anticipated audit, how to analyze an Information Document Request (IDR), and how to solicit a client's cooperation in developing an Audit Plan attend this webinar IRS Audits – Step by Step