What you should know about IRS Tax Audits

  • IRS audits are rare - less than 1% of returns filed. The higher your income, the more likely you will win this lottery.

  • The IRS will notify you that your return has been selected using regular snail mail or possibly by phone (there are a lot of phone scams going on so the only information you should supply by phone is the agreement on appointment time and place). Email is never used and is always a scam.

  • Most IRS audits are by correspondence. Many times you don't realize that you were audited since the IRS letter just asked for clarification and some documents for a particular item on a return.

  • There are two types of face-to-face audits - Office Audit and Field Audit. Office audits are held at an IRS office facility while field audits are held at your location.

  • You have the right to have a representative stand-in for you provided that representative is an Enrolled Agent, CPA, or Attorney.

  • You have the right to appeal, regardless of whether your audit is face-to-face or correspondence. Many times, Appeals will get you better results.    

My Rules for Dealing with the IRS

  1. Never ignore them. They are not likely to forget about you and nobody likes being ignored, particularly those in big and powerful government agencies.                                                                                                          

  2. Never lie to them. Lying to a federal agent is a CRIMINAL offense. If you don't know the answer to one of their questions, don't guess. Tell them you will have to research it and get back to them. This is where having a representative can be a wonderful thing. I have an easy time saying to a Revenue Agent "I don't know, let me get back with you later on the answer for that."                                                                                                     

  3. Never lose site of the fact that the Revenue Agent or Officer is there to represent the interests of the government, not yours. They are not your friend. They want to close the case for the maximum amount of additional taxes while expending the least amount of time possible.                                                                   

  4. Do not expect to understand most of their decisions. Revenue officers and agents have bosses, caseloads, vacations, etc. that we are not privy to. Sometimes they will be easier to deal with than other times simply because they have too many open cases and must get some of them closed. Other times they don’t feel so pressed and are in a position to negotiate harder. 

When Should You Hire a Pro to Represent You in the Audit?

It depends upon the type of audit and the complexity of the issues.  Here are a few guidelines to consider:​

  • If you have received a correspondence inquiry for an issue that you are comfortable with, by all means, send them the requested information.

  • If you have received a notice of an office audit and you understand the issues that they are requesting information about, then perhaps you can do it yourself. If you are a business owner, sending a representative is probably the better idea.

  • If you have received a notice of a field audit, then having a representative is the better approach. The representative can have the auditor meet at his or her office and avoid disruptions of your workplace activities. A professional representative knows what to say and what not to say to minimize the impact of the audit on your life and your wallet. 

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