No one likes to be audited. It doesn’t matter if it’s the IRS or a state doing the audit or if it’s a full audit or a notice of a change. Just the letters make us nervous. But most of us make it through the audit and life goes on. Before you completely leave the audit behind, however, clean up your files and make sure you have documented your work.
You need to treat the audit as if you are filing a return. Once a return is done, you should make sure that a copy of the return and all the W-2s, 1099s, receipts and other documentation are together and securely filed away. The same should be done when an audit is over. What to save?
- A full copy of the original notice.
- A copy of the amended return if one was done.
- A copy of all correspondence. This should include what you sent them and they sent you.
- Notes from phone calls.
- Anything you signed for the IRS, state or your preparer.
- All documentation.
Look, you may still need that info. If there are changes made to your Federal return, the IRS will notify your state. The state will want you to amend your state return to show the changes made to the Federal return. Or, you may mention to your preparer that the IRS wanted more money and you sent it to them. Even if the IRS was correct, and don’t assume they were, the changes might affect other returns. Your preparer will need to know what was done for one year to change later years or to make sure the changes were correct.
I’ve lost track of the number of times I needed the info from an audit to prepare a return or handle a state request or “fix” other years and the client can’t find it. Too often they can’t remember what the change concerned. That means a power of attorney and a longer turn around time. It’s easier to keep all your records from the audit where you can get them if they are need. It doesn’t have to be a box of papers; they can all be scanned into a computer file and archived. But keep a record of your audit just as you would a return. And, FYI, make sure your preparer gives you a copy of anything you sign for them including the power of attorney.