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By: Lisa Moren-Bromma
IRA & 401(k) Insights
Do you think as real estate investors, your chances of getting audited by the IRS are greater than most? If so, please take note of these four ways to prepare for an audit, in advance.
1. Delaying a request from the IRS can cost you the right to fight. If you receive correspondence from the IRS, take action within the required time frame, which is usually 30 days. Otherwise, the dispute becomes final and will be moved to the collections department. You have a right to ask for a postponement if you need more time, so make sure you do this within the allotted time.
2. Have a professional on your side. Many investors do their own taxes, but if someone else prepares your taxes, make sure they get involved in any correspondence or audit.
3. Anything you say can be used against you. This one is pretty self-explanatory.
4. The auditor’s boss or supervisor may be able to negotiate with you if you are unhappy with the auditor’s decision.
The number of audits is on the rise. If your income is under $200,000 there is still about a 1% chance the IRS will audit you. If the worse happens, be prepared.
Lisa Moren-Bromma has 30 years of investing experience, primarily in real estate and the cash flow industry, and has taught more than 1,000 seminars on the subject. She is the author of Wise Women Invest in Real Estate and Real Estate Investing For the Utterly Confused, and is editor of the Wise Women Investor blog and newsletter.
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