An IRS audit can be a daunting experience, especially when you’re missing important documentation. The IRS expects taxpayers to have proper documentation to support their income, expenses, and deductions. If you don’t have the necessary documentation, it can result in additional taxes, fines, and penalties.
One of the main reasons for missing documentation is poor record-keeping. Many taxpayers fail to keep accurate records of their financial transactions, which can make it difficult to provide the necessary documentation during an audit. Some of the common types of missing documentation include:
- Bank statements
- Canceled checks
- Mileage logs
- Credit card statements
The penalties for not having proper substantiation can be severe. The IRS can assess penalties for failure to file a tax return, failure to pay taxes, and for underreporting income. The penalty for failure to file a tax return is typically 5% of the unpaid tax for each month or part of a month that a return is late, up to a maximum of 25%. In addition, you may be subject to a penalty of up to 25% of the unpaid tax for failure to pay the taxes on time.
This is where hiring a professional tax resolution firm can be beneficial. A professional tax resolution firm can help you navigate the complex regulations surrounding tax laws and ensure that you’re reporting your income and deductions correctly. They can also help you gather and organize the necessary documentation to support your claims, even if you’re missing some of the records. They can assist you in reconstructing missing documents using bank statements, credit card statements, and other financial records.
A professional tax resolution firm can also help you negotiate with the IRS and work out a resolution if there are any discrepancies or errors found. They can also help you appeal any decisions made by the IRS and represent you in court if necessary.
In conclusion, an IRS audit can be a stressful and overwhelming experience, especially when you’re missing important documentation. Hiring a professional tax resolution firm can help you navigate the process and ensure that you’re in compliance with tax laws. They can help you gather and organize the necessary documentation, even if you’re missing some of the records, negotiate with the IRS, and represent you in court if necessary. It’s important to have professional help to avoid penalties and fines and also to get the best possible outcome in the audit.