Today I met with a friend and the IRS for a face to face audit of his 2011 personal and business taxes. The audit was at the IRS offices located at 290 Broadway in NYC. The meeting started at 11 am and ended at 1:30 pm. Again, he runs a business and they wanted an explanation of his business and his business expenses.
Here are the important takeaways from the audit:
* Don’t Panic
IRS employees are people too. Ours was pleasant and professional. She lives in Brooklyn, sends her son to a charter school and loves to garden. She even shared her skittles.
Her office neighbor’s ringtone of Lil Jon and Usher was pure comedy.https://www.youtube.com/watch?v=GxBSyx85Kp8
* KEEP ALL YOUR RECEIPTS/INVOICES/CANCELLED CHECKS
That is the most important take away. The more receipts/invoices/cancelled checks you have, the less you need to worry about an audit (They don’t want bank statements).
This also goes for people who itemized deductions on Schedule A for charities and medical expenses.
* Be Organized
The more organized you are, the faster everything goes and the easier the process. Software is helpful in explaining expenses but receipts are what they really want. Scanners and folders are worth the investment.
* Be able to explain your business in detail
The IRS wants to make sure the expenses you claim make sense for the business.
* Respond to an audit as soon as possible
Again, having the receipts makes the process so much easier.
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