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Understanding IRS Audits: What to Expect and How to Prepare | Layton & Stacey Smith
Your heart is pounding because you just received the worst letter at exactly the wrong time in your life. The IRS is deciding to audit a past tax return, and you’re unsure why.
You did everything correctly. How are you supposed to handle this situation?
Listen to this episode, and we tell you exactly what you’re supposed to do. Grab your drink and cigar, and join us in the Somerpoint Cigar Lounge.
Why Are You Receiving an IRS Audit Letter?
What is an IRS audit? It’s when the IRS has reviewed an organization's or individual’s tax return for a specific year and is looking for more verification.
Most of the time an audit is not as stressful as many people believe it is to be. Layton shares an example of a client missing documents for her schedule A, which was an odd situation.
The story shows how often it happens and why you shouldn’t over-worry when you receive an IRS audit letter.
Different Types of Audits
We go over the different types of audits:
Mail: The audit is conducted through the mail.
Field: An audit is conducted at a tax professional business or your business location.
Office: This involves you going to the IRS office for the audit.
In all cases, an auditor goes through the documentation to verify income information for a specific year.
Common Triggers: Why Are You Being Audited?
Here are some of the reasons you may be chosen for an audit:
Excessive business expense deductions
Rental losses
Earned income credit
Cryptocurrencies
Layton goes over each common audit trigger and provides examples of how to handle each situation. He also explains why random audits happen, especially for small businesses.
“We had a landscaping company with four trucks that didn’t keep mileage records. We had to rebuild it for the past year. If you’re self-employed, keep records. It makes everything easier.” - Layton Smith.
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By Layton Smith and Stacey Hoffler SmithYour heart is pounding because you just received the worst letter at exactly the wrong time in your life. The IRS is deciding to audit a past tax return, and you’re unsure why.
You did everything correctly. How are you supposed to handle this situation?
Listen to this episode, and we tell you exactly what you’re supposed to do. Grab your drink and cigar, and join us in the Somerpoint Cigar Lounge.
Why Are You Receiving an IRS Audit Letter?
What is an IRS audit? It’s when the IRS has reviewed an organization's or individual’s tax return for a specific year and is looking for more verification.
Most of the time an audit is not as stressful as many people believe it is to be. Layton shares an example of a client missing documents for her schedule A, which was an odd situation.
The story shows how often it happens and why you shouldn’t over-worry when you receive an IRS audit letter.
Different Types of Audits
We go over the different types of audits:
Mail: The audit is conducted through the mail.
Field: An audit is conducted at a tax professional business or your business location.
Office: This involves you going to the IRS office for the audit.
In all cases, an auditor goes through the documentation to verify income information for a specific year.
Common Triggers: Why Are You Being Audited?
Here are some of the reasons you may be chosen for an audit:
Excessive business expense deductions
Rental losses
Earned income credit
Cryptocurrencies
Layton goes over each common audit trigger and provides examples of how to handle each situation. He also explains why random audits happen, especially for small businesses.
“We had a landscaping company with four trucks that didn’t keep mileage records. We had to rebuild it for the past year. If you’re self-employed, keep records. It makes everything easier.” - Layton Smith.