What's the IRS Audit Process?

The IRS conducts thousands of audits on taxpayer’s tax returns every year. Audits come in three forms: Correspondence, Face-to-Face, and Field. If you are selected for an audit, it does not mean that you have done anything wrong. What it does mean is that the IRS needs to determine if your tax return was prepared correctly.

The IRS examines every tax return filed. With the use of its computer program, Discriminate Function System (DIF), it compares your deductions with the averages. If your DIF score is higher than average, you are more likely to be audited.

A correspondence audit comes by mail. You receive an IRS notice that requests more information regarding a specific item on your tax return. Read the notice carefully and comply with its request promptly. You will be asked to submit documentation to prove what was reported on your tax return. Make copies of your documentation. Never send your originals to the IRS. Mail your documentation via certified mail so you have proof that the IRS received it by the deadline indicated.

If you receive correspondence from the IRS stating that you owe more taxes because of a math error or because you failed to report income that was reported on your 1099 form, do not pay the amount without first comparing your tax return with the information on the IRS notice. The IRS can miscalculate what you owe or enter data incorrectly too. If you disagree with the added tax, you must appeal in writing within 60 days.

If the IRS requests a face-to-face audit, you will be asked to come to the auditor’s office or in the case of a field audit; the auditor will come to your home or place of business. If your tax return was prepared by a tax professional, you can ask that the audit be performed at their place of business. To keep the auditor away from your office, you may also have to show that an audit would be disruptive to your place of business.

If your tax return was prepared by a tax preparer, you may have them come to the audit with you. If your tax return was prepared by an attorney, CPA, or “enrolled agent”, they can attend the audit in your place.

The auditor will ask some easy questions at the start of the audit. After these initial questions, the audit will start in earnest. One of the most important things to remember is never give the auditor more information than is requested. Do not bring any documentation that was not requested on the audit notice and do not answer any questions that do not pertain to the tax return in question. Answer questions courteously but with short answers and no explanations. The more you say, the more you may find yourself alerting the IRS to investigate you closer.

After the audit, you will receive a copy of the auditor’s report. If you disagree with the auditor’s findings, you may make an appeal to the auditor’s supervisor on the spot. If the supervisor agrees with the findings, you have 30 days to appeal to the IRS Appeals Division. If you still are not happy with the outcome, you can take your appeal to Tax Court.

Darrin T. Mish (http://www.getirshelp.com) is a Nationally recognized Attorney whose practice focuses on representing clients across the United States with IRS Problems. He is AV rated by Martindale-Hubbel and is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. He has been honored by a listing in Martindale-Hubbel's Bar Register of Preeminent Lawyers. He can be reached at his website at http://www.getIRShelp.com