I was researching audits awhile back. While on the IRS website I stumbled some guidance. I found #6 interesting. Keep records for 3 years if situations (4), (5), and (6) below do not apply to you. Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction. Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return. Keep records indefinitely if you do not file a return. Keep records indefinitely if you file a fraudulent return. Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.
They sent my mom a letter wanting to review some of her taxes from outside of the "normal" 7 years. She showed up with all the paperwork for the year they were requesting and (from what her attorney said) they about dropped a brick when she produced it. They then tried asking about some returns from an even older year and she had that, with all receipts, in a box with her. Nice when you break it off in the IRS and they have to admit defeat live and in person.
A friend I used to work with had a small apartment building, she got audited a few times, always got more money back after the audit.
Do you use a accountant or tax guy ? He / she should be your first line of defense, that's their job. We had a few issues this year with both state and federal, accountant made a couple calls got it all cleared up.
Several times, both by state and federal. 35 yr old business. There’s absolutely nothing you can do unless you’ve knowingly done something wrong. Then you’ll have an attorney, unless you’re really stupid. I was picked at random every time and nothing ever came of the audits.
Actually..... Most of my friends who have been fall into that category as well.. But most of them had withholding but never filed. So.... Lol
Depends on what they're looking for. I got hit in the late 90's over writing off racing expenses. I was advised to write off as a business intending to make a profit, but of course never did... Had my tax guy with me (and 3 years of records) and it worked out fine. Stressful but fine.
They sent me a letter about 10 years back claiming I didn't pay the proper taxes on some company stock options I exercised. I forwarded them all the tax withholding documentation that I filled out at the time of exercising them and that was the last I heard of it. Granted I think I might have left it out the first time around when I initially filed my taxes that year.
He gets a letter and presumes it's an audit prior to opening. Hmmmmmm. I'm sure he has nothing to worry about. Audits are not selected randomly.