Category: Financial Problems

24 Aug

4 Keys to Surviving a Tax Audit

   

You've just received the dreaded letter from the IRS, which says that either your personal income taxes or your business taxes are about to be audited. The IRS will perform one of three types of audits: a correspondence audit, an IRS office audit or a field audit.

  1. A correspondence audit is conducted through the mail. The IRS is probably asking for specific documentation of a certain item on your tax return.
  2. An IRS office audit usually checks up on people who are either self-employed or own a small business. You may be asked to bring a list of items to a local IRS office, or you may be asked to stop by the IRS and explain your entire return.
  3. A field audit is the most comprehensive type of audit. In these cases, an IRS agent will come to your home or place of business to physically examine items deducted on your tax return.
4 Keys to Surviving a Tax Audit

In many cases, you should seek the assistance of someone who has completed either a traditional or online graduate tax program. Also, while you go through the process, keep these four keys to surviving an audit in mind.

Educate Yourself

The National Small Business Association suggests you prepare for your audit by reading IRS Publication 1, entitled "Your Rights as a Taxpayer." Additionally, obtain a copy of Publication 556, "Examination of Returns, Appeal Rights and Claims for Refund." Read any additional IRS publications that explain the specific tax issue that the agent wants to discuss.

You may know that the IRS wants to audit you because you've failed to pay the taxes that you owe. Navigate to the IRS website and click on the "Payments" tab at the top of the page. You'll see information about how to pay and what to do if you if you can't pay. Use the information to come up with a payment proposal, and bring your payment proposal to your audit.

Bring Only Necessary Documents

Avoid providing information that the agent hasn't specifically requested. For example, don't bring documents related to prior years' returns. If documents or receipts related to your audit are missing, then you have the right to reconstruct that information by talking to others. For example, if you made a donation to charity but lost the receipt, you can ask the charity for a copy.

When you correspond with the IRS, keep every document that you receive from the agency. Take notes during all of your meetings, and use those notes to formulate a letter to the IRS. Explain what was said during the meeting and any agreements that were made in the letter, and mail it to the IRS so that the letter is in your file.

Milk the Schedule

As a taxpayer, you have the right to schedule your audit at the time and place of your convenience. If you need additional time to prepare documents, request a delay. You can request a recess at any time during the meeting if you need to consult a tax professional.

Although you can stretch certain aspects of the schedule, do not fail to meet IRS deadlines. If the IRS requests a response from you within 30 days, then you need to respond. The smartest thing you can do is either to respond immediately or give the correspondence to your tax professional. Avoid setting the correspondence in a drawer and forgetting about it.

Say Only What Is Required

Giving away too much information during an audit is not in your self-interest, but withholding information from the IRS will make matters worse. If you've made a mistake on your tax return for a certain year, then admit the mistake, but don't volunteer information if you've made the same mistake during other years.

You have the right to limit the discussion and the scope of your audit to the issue brought forth by the IRS. However, remember to treat the agent with respect. Avoid speaking disrespectfully, and control your emotions. If the auditor mentions fraud at any time, then talk to a tax professional.

An IRS audit can seem both scary and highly inconvenient. Since noncompliance is unwise, you should cooperate with the agency. Remember your rights, and be honest without volunteering non-essential information. If you have any questions at all, consult a tax professional.

About the Author: Steven Harris is a tax professional who has published a number of articles and blogs related to income tax. He's also an audit survivor.

 
7 Jan

Why Companies Should Hire a Legal or Financial Consultant

Running any business, whether it's international or not, is no easy task. It requires a lot of hard work and research for a company to reach its goals. Thankfully, this isn't something that companies have to do alone. In fact, it's businesses can get help from outside resources in turning vague hopes into actual business goals. Here are some reasons why hiring a legal or financial consultant is good for companies.

Financial Consultant

Avoiding Financial Clutter

Companies, especially those that are involved with international investment, often have portfolios with no rhyme or reason. In the business world, this is often referred to as financial clutter. The problem typically arises when companies lack any kind of cohesive financial plan. International legal consultants, such as Dr. Shahram Shirkhani, specialize in helping companies come up with proper investment strategies by sorting through all of their finances.

Help Handling the Finances

Most people who run businesses are perfectly capable of handling their company's finances. That being said, these same people often find it hard to make time to handle the finances. This isn't because they lack the skills to do so but because other things get in the way. Sometimes it's family, and other times certain aspects of the business require more of their attention. This is where a financial consultant comes into play. Not only can they help business owners sort out their finances, but they can also provide an independent view on the situation. The financial future of a company is too important to be ignored, and a financial consultant can give this prospect the dedication that it deserves.

Insider's Look at the Industry

Unlike other people who are hired by a company, financial and legal consultants are able to provide a rare look into the rest of the industry. This is because they have the privilege of working with many different supply chains and organizations. This gives the consultants not only expert knowledge on how to deal with certain situations, but it allows them to provide detailed information about the rest of an industry to help companies keep up with industry changes. It also allows them to provide an in-depth look about problems that a company's industry may be facing in a different sector. This gives the company plenty of time to look for a solution to the problem or to be armed with the right information prior to an investment in that sector.

Whether or not a company chooses to hire a financial or legal consultant is determined by that company's individual needs. Just like any other service that a company may use, determining if a consultant is needed is based on the company's perceived value of the service. In the end, however, it's important for the leaders of a company to be brutally honest with themselves on whether such a service is needed or not. Using such a service doesn't take away from a person's ability to run a company, nor does it make them look weak. In fact, it proves that they care enough about their company to do what is right.