The idea of a surprise visit from the IRS can be enough to stoke fear in just about anyone. Mark Hauser is a specialist in the private equity sector, finding success with investing and as a business leader and entrepreneur. The founder of Hauser Private Equity, Mark Hauser, works diligently to ensure his clients are prepared when it comes time to deal with an IRS audit.

To help his clients and potential readers prepare for an audit, Hauser outlined what to expect from the experience.

What Is An IRS Audit For?

A host of different actions can trigger an IRS audit. IRS audits are typically performed to reduce the supposed ‘tax gap’ between the money that the agency is receiving and the amount that the taxpayer owes. An IRS audit involves carefully reviewing an organization or individual to ensure information is appropriately and accurately reported and recorded.

There are several ways that an IRS audit may find its way to an individual. According to Mark Hauser, the most common risk factors that can trigger an IRS audit include

• Failure to Report Income
• Excessive Expenses
• Home Office Deductions
• Schedule C Losses
• High Charitable Donations
• Math Errors

Preparing for An IRS Audit

An IRS audit will begin when the taxpayer decides whether or not they want professional representation. A paid tax preparer, IRS enrolled agent, or Certified Public Accountant can accompany the taxpayer, though this will come with a fee.

No matter what, veteran private equity investor Mark Hauser advocates getting prepared in a neat and orderly way. Let’s look closer at what this entails.

• Prepare Documents – Taxpayers must assemble all the documents requested by the IRS. Hauser notes that taxpayers should keep their tax return documents from the original filing date for at least three years. Bring copies to the audit.
• Find Representation – To best prepare for a tax audit, Hauser suggests finding a professional to help throughout the process. Taxpayers have a right to representation or self-representation.
• Good Attitude – While an audit undoubtedly involves stress, a good attitude can help create a cordial and cooperative process.

Potential IRS Outcomes

After the audit, the IRS will review all appropriate documentation before deciding. Hauser notes that there are three fundamental audit outcomes possible for taxpayers:

• No Changes – The taxpayer has verified their claims, and no further action is required.
• Changes With Agreement – The IRS has proposed changes the taxpayer understands and agrees to.
• Changes No Agreement – The IRS has proposed changes that the taxpayer has rejected, leading to potential mediation or an appeal at a later date.

No matter the audit’s outcome, proper preparation is the most critical aspect. Work with a professional like Mark Hauser to ensure that your needs are met when it is time to prepare for an audit.