Tips For Quicken And Microsoft Money Users

By Stephen Nelson

Although your chances of being audited are probably remote, some of the people who read this will be audited. Here are some things you should do - and shouldn't do - if you get audited.

Quicken or Money Tasks You Should Complete

The Quicken and Money Tax Summary reports list and tally each of the taxable and tax-deductible transactions included on your return. Since the audit will probably consist of the agent reviewing these transactions and deductions, you’ll want to have a listing of the transactions if you use Quicken, Microsoft Money or a similar software program. A Tax Summary report gives this information.

If you know beforehand that a specific tax deduction is being questioned, be sure to bring all the source documents that evidence the pertinent transactions. For example, if the IRS is questioning your charitable contributions deduction, bring any canceled checks you used to make your contributions.

WARNING Don’t bring a laptop computer with Quicken or Microsoft Money to the audit. The IRS agent may appreciate your enthusiasm, but remember that your Quicken or Microsoft Money file largely summarizes your financial life. And Quicken’s or Money’s reports make it easy for the agent to quickly review every nook and cranny, searching for income you may have missed or deductions you shouldn’t have taken.

Other Pre-Audit Preparation Tasks

There are a couple of other things you should be sure to do before you attend the audit, First, make sure that you understand all the numbers on your return, and remember that you signed it under penalty of perjury.

Second, you may want to consider asking your tax preparer to represent you at the audit. There are a variety of reasons for doing this. If you don’t understand your return but your preparer does, it makes sense to have the preparer at the audit.

Sometimes it also makes more sense to have a tax practitioner represent you because he or she knows (or should know) quite a lot about the income tax laws but relatively little about your financial life.

I know a tax attorney who follows this approach because the tax practitioner can honestly answer many IRS questions by saying, “I don’t know.” The tax attorney feels that the “I don’t knows” tend to terminate many spontaneous inquiries.

Things to Do during the Audit

An audit doesn’t have to be a bad experience. All that really happens is that the IRS agent will ask you to explain and document items that the IRS doesn’t understand.

Nevertheless, let me provide you with two final suggestions. First, if the agent identifies himself or herself as a special agent, ask to terminate the interview so you can reschedule it. A special agent investigates criminal tax code violations, so you’ll probably want a tax attorney present at any meetings.

Another thing I suggest is that you be very reserved in your comments. Don’t lie, of course, but don’t volunteer extra information. If you have questions about some deduction or how to treat some income item, ask a tax preparer or telephone the IRS’s taxpayer assistance line, but don’t expect the IRS agent auditing your return to answer tax-preparation questions. (My feeling is that there’s a very strong tendency for the auditor to look only for things that increase your income tax bill, and not for things that decrease your bill.)

About the author: CPA Stephen L. Nelson is the author of numerous best-selling books about small business accounting and the popular downloadable do-it-yourself incorporation guides Incorporating Incorporating a Business in Georgia, Incorporating a Business in Virginia and Incorporating a Business in Massachusetts

Article Source: http://EzineArticles.com/?expert=Stephen_Nelson