First, relax. If you take these five steps, you'll escape unscathed.
So you’re one of the roughly 1.2 million Americans who get slammed with an IRS audit each year. Thankfully, though downright terrifying, the process isn’t as toothed as it may seem. As you’re getting all of your ducks in a row, follow these CPA-approved tips to a tee. You’ll make it through to the other side without the slightest dent to your financial stature. And if you’re in a position to just dodge the process altogether, check out the 5 Best Ways to Avoid Getting Audited by the IRS.
Enlist expert help
“Professional fees alone can cost anywhere from $1,000 for a few hours of work — say, a review of your travel and entertainment expenses — to $12,000 for an examination of all the income and expense records for a relatively complicated personal return,” says CPA Julian J. Miller, of Miller & Company CPAs, in New York City.
The penalty can reach 25 percent of the total tax owed. By paying right away, you’ll at least stop the cost from mounting. File an amended state return as soon as you settle up with Uncle Sam, because you’ll owe back tax and penalties to the state as well. For more money advice, check out How to Cut $10,000 From Your Annual Expenses.
A government study found that 41 percent of taxpayers who took their cases to the IRS appeals division won at least a partial reduction. For more on taxes, check out The One Last-Minute Tax Move You Need to Know.