Getting a notice that you’re being audited by the IRS can strike fear in the hearts of the bravest of taxpayers. But educating yourself and following a few simple rules can make the process less painful.
Audit Types
Some audits are worse than others. You can expect either:
- correspondence audit, by mail, asking for a straightforward answer (by mail) on less complicated issues, such as proof of deductions
- An office audit, held in the IRS office, where you will be asked to produce receipts and other documents related to specific issues
- A field audit, where the IRS agent comes to your home or place of business
Showing Financial Documents
The IRS has the right to look at your financial records to see if you have reported your deductions, exemptions and credits accurately. But it’s to your advantage to:
- Ask questions of the IRS agent ahead of time to make sure you understand exactly what the IRS is looking for
- Provide only the documentation that is being asked for, and nothing more
- Organize the paperwork you turn over to the IRS, so that the audit agent does not have to go looking through stacks of unrelated documents and find something else that needs auditing
- If you are missing receipts or other documentation, try to reconstruct the information as accurately as you can, based on other documentation
Audit Preparation
There are many things you can do before an audit to get ready:
- Talk to a IRS tax attorney, IRS Tax Lawyers or certified public accountant to understand the issues the IRS will be focusing on
- Thoroughly review IRS Tax Publication 1, the Taxpayers Bill of Rights, which would have been included with the notice you were being audited
- Research the issues on the IRS website, www.irs.gov
- Discuss the situation with the professional IRS tax preparer, or your IRS Tax Lawyers who helped you with the return(s) in question, and decide whether they should be present with you in the audit
- Do not hesitate to ask for a postponement of the audit, especially if you are having trouble assembling all of your records
During the Audit
Many IRS Tax Lawyers advise having a IRS Tax Lawyer or certified IRS Tax professional represent you during the audit, instead of going yourself.
If you’re going to be present during the audit:
- Do not freely volunteer information of any type
- Answer questions as concisely as possible
- Do not lie
- If you sense things are not going well, do not hesitate to halt the audit so that you can consult with your IRS Tax Lawyers or accountant before continuing
- Ask to speak with the audit agents supervisor if you think the agent is not being fair
The IRS must complete an audit and give you an examination report within three years of the time you filed the return.
Appealing Audit Results
Most people come out of an audit owing some amount.
What can you do when you can’t live with the tax bill you get after an audit?
- Meet with the auditor and their supervisor to discuss the process and results, and see if they are willing to be a little flexible to avoid an appeal
- Appeal the IRS Tax audit results to the IRS Appeals Office
- Take an appeal in Tax Court
Appealing your case within the IRS or to Tax Court will often net you some savings, and buys you time to figure out how you will pay the final tax bill.
Interest continues to build on the amount owed while you are appealing, and an appeal within the IRS may uncover issues not spotted by the initial auditor.
Instructions for appealing an audit result should come with the examination report, but you can also find this information at your local IRS office.
Follow the steps above and you will be helping yourself to get through the IRS Tax Audit with a minimum of disruption.