How to Survive an IRS Audit

On Monday the Roni Deutch Tax Center – Tax Help Blog posted a very helpful article on how to survive and IRS audit. Over the past 18 years I have heard so many horror stories about audits, and most of this panic is entirely unnecessary. If you stay organized, and were honest on your tax return, then you will most likely not have anything to worry about. However, to help any one preparing for an audit, check out the following list of tips.

Always Be Prepared

Technically, every single taxpayer is eligible for a tax audit. While some audits are selected because the taxpayer’s return flagged the system, many are conducted entirely randomly. This means that as a taxpayer you should be prepared for the possibility of an audit at all times. You should make sure to you keep all financial documents, W-2’s, receipts, etc., in one safe place. That way if you are audited, you can easily find everything you will need to verify your income and deductions. Although there is no way to fully avoid being audited, you can follow some of these tips while preparing your next return to try to reduce the odds.

Read and Respond to Notices

Generally, when the IRS notifies you of an audit you must respond within 30 days. If you do not, then you risk having the IRS review and adjust your total tax liability without getting your input. In addition to responding quickly, you will also want to take a thorough look over the notice. It will give you specific information on what is being examined, so that you can prepare for your audit knowing exactly what is being scrutinized.

Know your Rights

Do not let yourself get intimidated by aggressive IRS agents, as a taxpayer you have a set of rights designed to protect you and your money. You have the right to select where the audit takes place, when it takes place, etc. Do not let an auditor intimidate you in to having an audit at your place of business unless that is where you want it. To learn more about your rights during an audit, check out IRS.gov.

Take your Time

Just like you, the IRS makes mistakes and easily could have made one on your case. Take your time compiling your records and be absolutely sure you have everything that you need. Do not let an IRS agent push you into setting a date for your audit. Take as long as you need to gather all of the financial documentation that you need in order to justify the tax return in question.

How to Do Your Taxes If You've Been Laid Off

Entrepreneur.com provided some useful tips recently to individuals who have recently been laid off, and how to go about doing their taxes. Check out a snippet of the post below, or you can read the full article by clicking here.

Around 2.6 million people lost their jobs in 2008.

Close to 600,000 more jobs disappeared in January 2009.

Horrible.

But there is a little good news. Believe it or not, Uncle Sam offers some tax breaks to folks in this unfortunate position.

So whether you lost your job in 2008 or 2009, listen up. You deserve these perks.

First, your income.

If you were a salaried employee, you’ll have your normal W-2 income and withholdings to report on your 2008 tax return.

If you received any severance pay, you should see that too on your W-2, also subject to federal income tax withholding.

Now let’s talk about your unemployment benefits. Remember, that’s taxable income too. So if you starting receiving benefits in 2008, hopefully you elected to have federal tax withheld. Now unfortunately, the government will only withhold up to 10%, so if you’re in a higher tax bracket, you will be underwithheld. But it’s certainly better than nothing.

If you are still on unemployment in 2009 and haven’t had any federal tax withheld yet -- stop what you’re doing! Go file Form W-4V -- Voluntary Withholding Request right now and request to have 10% withheld for federal taxes.

Again, this may not cover your whole federal tax bill -- and it doesn’t even touch your state tax bill -- but it’s better than nothing.

You should still be conservative and set a little bit of that unemployment check aside each week. Put that money in a little savings account and hold it till tax time so you’re not totally floored with a big tax bill.