5 Tips for Surviving an IRS Tax Audit

If you are chosen for an IRS tax audit, then there is nothing you can do to avoid it. The important thing is that you know what to expect, and that you keep one specific goal in mind: to end up owing the IRS as little money as possible. How do you do this? By complying, first of all, but also by doing everything you can to ensure you don’t trigger the IRS to investigate any items outside of the original causes for audit. Being audited can be a scary prospect; fortunately, there are things you can do to make it as smooth a process as possible, so as to protect your money and your sanity. Here are five tips for surviving an IRS tax audit.

Watch what you say. Do not provide any information other than exactly what was asked of you. Use yes and no answers any time possible. If you are not sure about something, tell you auditor you don’t know. Talking too much can cost you a lot of money. Giving false information, on the other hand, can cost you even more money, and possibly even jail time.

Organize your records. You aren’t expected to keep perfect records, but you are expected to have accurate and comprehensive records. Take your time preparing for your audit, and bring everything you have to support your story to the table. Showing up organized is a sign of respect, and a great way to get on the auditor’s good side from the get-go.

Act natural. This may seem like an oxymoron, but when you’re nervous (which you likely may be when dealing with an auditor), your mannerisms may betray you. Remember that auditors are trained to monitor behaviors for anything unusual, and the last thing you want to appear to be to an auditor is deceptive. Take a few deep breathes, relax, and just be yourself.

Keep your originals. The IRS is known for misplacing documents, and if your auditor loses anything pertinent to your case, you will have to produce it again. Provide only copies to auditors and keep your originals.

Seek professional help. Although it’s not necessary, you might want to consider enlisting the services of a professional tax preparer. Accountants understand the audit process and know how the IRS operates; therefore, having one on your side can improve your chances of surviving the audit with as little damage as possible.

No one wants to face an IRS audit. Unfortunately, many people do, any you might be one of them. Follow these tips to get through your audit and make the process as painless as possible.

About the Author: Jake Saechao is a full-time tax accountant who knows how stressful receiving an audit notice can be. At the end of a long day he enjoys sipping a cup of oolong tea, searching www.goldenmoontea.com for new blends, and simply trying to forget about the numbers running through his head.

Gambling and taxes – what should you report?

Gambling is something that many people enjoy doing either on a regular basis or now and again. Of course, gambling is a much more enjoyable pastime when you are winning rather than losing! However, if you are one of the lucky ones on a winning streak you need to bear in mind that you’re probably going to have to give a slice of your good luck to the IRS, as it will be classed as taxable income.

In many cases, if you have been lucky enough to win a big jackpot the payer will actually deduct taxes from your winning upfront and the information will be issues to you via the W-2G form. The amount of money that you have won, and the type of gambling that you won it on, will determine whether the payer gets involved in taking your details and withholding part of your winnings for the taxman.

When you have bagged larger sums of money by way of winnings the payer will need to take your social security number to let the IRS know that you have come into some additional ‘income’. In some cases they will take the 25 percent tax from your winnings before you get your money. If you do not provide your social security details the payer could withhold as large an amount as 28 % of the winnings, so it is advisable to cooperate and furnish the casino with the necessary information.

Of course, you may only have won a small amount with your gambling, which will not warrant the payer to take your details and inform the IRS. However, in order to ensure that you are paying your taxes by the book you will still need to declare these winnings. Both big jackpots and smaller winnings can be reported under the ‘other income’ section of Form 1040. You can also supply details here of any taxes that were paid upfront on your winnings through deductions made by the payer, which will be detailed on the W-2G form.

The good news is that whilst you have to pay tax on your gambling winnings you are also able to deduct tax on your losses. So, unless you struck really lucky and scored a big jackpot with your very first bet you can recoup some or even all of the money that you pay on taxes on your winnings based on how much you lost on your gambling.

Andrew writes frequently about personal finance as well as issues effecting both consumers and small businesses, covering everything from credit cards to mortgages to mortgage loans.