Tax Tactics - AUDIT SURVIVAL STRATEGIES

Do stock photographers get audited by the IRS? The Law of Probability says you probably won't. However, be that as it may, and just because you can back up every item on your return, don't make the mistake of being complacent and figuring you'll never have to worry about an audit. Those relentless IRS computers may bounce your return for any number of reasons, including pure chance. If you do face an audit, here are some tips on how to make the experience less traumatic and less costly.

The audit usually begins with a letter of notification from the IRS. What you have to do after that depends on the type of audit you must undergo and the records you need to assemble.

CORRESPONDING AUDIT. This is the simplest type of inquiry. The IRS will want more information to justify one or two relatively simple items on your income tax return. Send an explanation of your position by return mail, along with any records needed to support it.

Do not, though, send originals; send copies. Records can be mismailed, misfiled or mishandled by either the post office or the IRS and might not be available when you need them. In case your records are too extensive or bulky to photocopy and mail conveniently, or if you feel it would be difficult to explain your position in writing, you can request the IRS to schedule an in-person appointment.

CAUTION. Be sure to comply with the deadline set in your audit notice or arrange for an extension. Otherwise, the IRS has no choice but to rule against you and send a bill for additional taxes.

OFFICE AUDIT. This is the most common type of audit. The audit notice will list a specified time for a face-to-face meeting at the nearest IRS office. But you can phone or write the agent and reschedule the appointment for another time if that is more convenient.

The notice lists the items that are up for an audit. Example: medical expenses, charitable contributions, unreported income, etc.

Before you visit the IRS, organize your records and go over your explanation, to be prepared if the IRS agent questions you on an item for which you have no substantiating records.

It's also a good idea to make your own self-audit and determine whether you can uncover some deductions or other items in your favor that you overlooked when you filed. Then you might be able to reduce any added taxes that the IRS wants to impose. You are entitled to argue new points in your favor, as well as to defend your return as filed.

FIELD AUDIT. This type of audit is conducted at your home or place of business or at the office of your tax adviser. It can involve an extensive examination of your entire return and is usually reserved for someone with a more complex return that shows business or professional income.

TIP. An audit can be fairly routine -- say, proof of expenses that the IRS concedes are deductible. Either you can come up with the required records or you can't. You may be able to handle the audit without professional help. But if a point of law is the issue, then it might be wise to have a tax expert on your side. You can ask for a delay in which to seek help.