What Can I Expect in an IRS Audit?

Many people are filled with an increased sense of dread when they learn that they are to be audited by the Internal Revenue Service. However, it is important to remember that the more prepared you are, the more in control you are. Preparation can help lead to decreased anxiety about the events that are unfolding. IRS Audits are sometimes necessary and do not need to be altogether unpleasant. Understanding what will occur can help you to be ready for the different questions that might be posed and the different options that you have during the course of the audit. It is important to make sure that you are honest when you are filing your taxes and that you will be able to support any claims that you make with physical proof that you can show auditors if you do in fact need to be audited.

First, a person will receive a notice that they are going to be audited. An audit is not an accusation against the taxpayer; it is just a check-up to make sure that everything is accurate. Cash businesses are easy targets for the IRS, as are businesses like lawyers and physicians that do their own bookkeeping. It is important not to panic when this notice is received. Sometimes there are face-to-face tax audits, but actually one-third of the audits that are performed by the IRS, approximately, are done through letters. The IRS simply writes a letter to the person or business asking for explanations of certain things that appeared in the person’s tax filing. Once an acceptance letter is submitted to the IRS explaining the issues, the audit is typically concluded. Of course, these are not the audits that most people hear about and are fearful of. Most people are worried about sit-down audits.

The notice will typically tell you why you are being audited and this will enlighten you as to what materials you will need to bring with you. It is very important to stay organized with your audit materials and have copies handy for the audit meeting. Some people have also found it helpful to bring with them spreadsheets that help to illustrate how the tax figures in question were calculated. It is important in many cases not to volunteer information to the IRS. Remain courteous, but it is not necessary to provide any information that was not specifically requested. Sometimes tax auditors are only concerned with a portion of the tax filing. If this is the case, you only need to bring your tax records that are in relation to the portion that is being reviewed with you to the meeting. If it is a company that is being audited, then it is important that the owner sits down and mentally review, if not write down, any different problems that their company might have come across during the tax year which is being looked into.

It is also important to remember that you have a number of different tax rights. This can help you when you are faced with an audit. Remember that you can have someone with you and represent you at your tax audit. This can be a lawyer or an accountant, for example. If you notify the IRS within ten days of the audit, you can also tape-record the audit session. It is also possible to appeal in a tax collections case. This can be done for reasons involving tax liens, levies and seizures. In some cases, it is not even necessary that you be there. By giving power of attorney to a representative such as an accountant or a lawyer, they can act in your place and it is not even necessary for you to be there. The only instance this does not apply to is when there is a specific summons for you, from the IRS.