If you’re dealing with a Los Angeles tax audit, it can seem too much to bear. That’s why it helps to be prepared, so you can weather the storm and walk away unharmed. We’ve put together a list of things that can help you survive your IRS tax audit.
What Triggers a Los Angeles Tax Audit
The best way to survive a tax audit is to avoid one at all costs. It can save you thousands of dollars in appeals, extensions, and payment plans.
Some common warning signs that may trigger a tax audit may include:
You made a lot less money last year — A sizable income increase may show that a taxpayer is underreporting their earnings, which may cause the IRS to look more closely at his or her returns.
You lost or forgot to file a form — Your employers will file a W-2 or 1099 form, and they will send you one as well. If your return doesn’t have the same paperwork, it could be seen as a red flag. If you notice any errors or incorrect information on your forms, talk with your employers to correct the situation.
You’re self-employed — While more people are working for themselves, it can lead to more scrutiny from the IRS.
You’re claiming losses from a hobby — While business expenses can be written off, people who pretend that a hobby is a business may try to write them off as well. You can only claim things as business expenses if you’re making a profit from the activity.
You’re deducting home office or car-related expenses — To qualify for a home office deduction, it must only be used for work.
You claim expensive meal and entertainment deductions — While entertaining clients is a necessary part of doing business, it can cause the IRS to take a closer look at your account, and that could trigger an audit.
You make inflated donations — The IRS notices people who make large charity claims on their returns. That’s why you need to keep records and receipts of all your donations.
You have an overseas bank account — While globalization has become more a of a reality in today’s world, offshore bank accounts are a major concern for the IRS. If you haven’t reported any money in offshore accounts, you should look into the Offshore Voluntary Disclosure Program.
The numbers don’t match — Mathematical errors can be enough to trigger an audit, so you need to make sure your tax return is correct.
What to Do About It
If you have found yourself in the middle of a Los Angeles tax audit, here are some tips that can help you:
Keep pushing them for delays, because it will most likely work in your favor. Ask more time if you need it, so you can get all your paperwork together.
Go to the IRS instead of letting them come to you. Meet them at one of their offices, or have a tax professional take care of it for you.
Keep accurate records. It will make your tax audit go more smoothly, and it will give you best results.
Don’t expect to get out of a tax audit without owing something,
Don’t divulge too much information on your own. People tend to say too much when they’re nervous.
Read up on the latest tax rules, regulations, and amendments so you know where you stand. And consider meeting with a tax professional to discuss your case.
Know Your Rights. Read the IRS publication 1 (the Taxpayers’ Bill of Rights) before your audit. If it’s not going well, ask for a recess to talk to a tax professional.
Take Your Time. The IRS must complete your audit within 3 years of the time you filed your return.
When you get your results, contact the auditor if you don’t understand or agree with their findings. You can file an appeal, or can move forward by taking it to Tax Court.
If you’re in the middle of a Los Angeles tax audit, and you have decided to work with a tax professional, there are some things that you should keep in mind. Here is the kind of information you will need from them:
“I received an audit from the IRS. What should I do?”
“I lost the receipts for some of the expenses I claimed as deductions? What should I do?”
“What information do I need to give to the IRS agent?”