Tuesday, June 18, 2013

4 Types of IRS Audits: What to Know and How to Prepare for Each One

Fox News ^ | 06/17/2013 | by Donna Fuscaldo

Being the subject of an IRS audit is enough to make anyone sweat, but knowing your rights and the type of audit your facing can help make the process a little less stressful and drawn out.
“There’s a lot of fear when you find out you’re getting audited,” says Mary Kay Foss, a certified public accountant. She suggests contacting a professional immediately after receiving the audit notice. “If you ignore it, it’s not going to go away.”
There are four types of IRS audits and you will prepare differently for each one:
1) Correspondence Audit: This is the least severe type of audit, according to Rocket Lawyer On Call attorney Mark Rosenberg and involves the IRS sending a letter in the mail requesting more information about part of a tax return.
For instance, the agency may have questions regarding charitable deductions and request you send in receipts to substantiate your deduction. “It’s the lowest level of the audits,” says Rosenberg. “If you have the receipts or information it’s generally not an issue.”
If your tax return is legitimate and you have the data to back up any claims on your return, tax professionals say you can normally handle the situation on your own. If you don’t have the receipts or information, then you may want a professional dealing with the IRS because you could face fines, penalties and interest if you end up owing money.
“If it’s small and not that much income, the audit is often done through the mail,” says Bill Smith, managing director of accounting firm CBIZ MHM.
2) Office Audit: If the IRS has more questions about your return, then you’ll get a letter in the mail inviting you into an IRS office for the audit.
(Excerpt) Read more at foxbusiness.com ...

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