Taxbot- 8 Steps to Prepare for an Audit – Sandy Botkins

You submitted your tax return and now you get a call from the IRS or Canada Revenue Agency to come in for a chat.

What should you do?

Here are 8 steps that you should know in preparing for the audit:

1. Always assume that you will be audited when you initially prepare your tax return: The best time to prepare for the audit is when you you’re preparing your tax return.

2. Don’t panic: An audit notice doesn’t indicate that anything is wrong. It is simply a request from the tax authorities to see if you did everything correctly.

3. Understand that the burden of proof is on you! Tax law requires you to prove your deductions are valid and you reported all of your income.

The IRS/CRA needs to prove nothing.

Being innocent until proven guilty doesn’t apply to tax audits.

Here is where Taxbot can REALLY help you and even cut your accounting costs. Taxbot will have all your documentation, including copies of receipts, in one place. This will greatly reduce anything that IRS or CRA agents will get out of you. It will also reduce the time for the audit. Less time means lower fees by your accountant.

4. Dress normally for the audit: Do not make a special trip to Goodwill to buy clothes. Don’t wear expensive clothes or jewelry such as Rolex watches.

Examiners dislike people who look like they make a lot of money.

5. Be on time for the audit! This is crucial.

Thirty minutes before the audit, the agent pulls out their diary to see who is coming and starts examining your tax return to see what the potential problems are.

If you are late, you are giving them more time to find out what possibly is wrong. Moreover, all tax examiners are graded on efficiency. If you are late, they are less efficient, which hurts their promotion chances.

You don’t want to start out with the examiner being mad at you.

6. Don’t volunteer information: More people get into trouble by opening their big mouths! Think about the show Law and Order. What do the police NOT want to perpetrator to do? Get a lawyer! Why? The lawyer will tell them to shut up.

7. NEVER be alone with a criminal investigator: If you are being criminally investigated, always call a criminal lawyer to represent you.

Don’t not speak alone to the investigator. If you say something wrong or that is a lie, you can be indicted for this.

8. Never tamper with the evidence or call government witnesses: Tampering with the evidence is a separate crime.

Many times it is easier for the government to indict you for evidence tampering than on the crime itself.

By Sandy Botkin, CPA, Esq, and IRS Insider