What To Expect if You Are Audited
The IRS has several different levels of audits. If questions arise about your math, items seem to be omitted from your return, or your figures don't match those on your W-2s, 1099s, or 1098s, the IRS may simply request a correction or explanation by mail.
Respond to the request as quickly as possible and, if you have doubts about the answer, consult your tax professional if you have one.
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Work Smart
The IRS makes mistakes, too. Don't assume the IRS notice is correct. Check things out. Computer-generated forms, which include the forms most commonly sent out to deal with small errors, are notorious for automatically adding penalties that may not apply in your situation. If you are in doubt, call the IRS and ask them about anything you don't understand.
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The first level of inquiry that can truly be considered an "audit" occurs when you get a letter requesting that you come into the IRS office to review one or more areas on your return. This is a true audit because the IRS is asking for proof of items on your return that go beyond your word. If you have kept records, including bills, receipts, and canceled checks, you shouldn't worry. The IRS may end up interpreting your situation differently than you, but there is no crime in having differences of opinion. Nevertheless, professional help may be in order with an office audit, particularly if you yourself suspect that there are errors or omissions in your tax return.
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Work Smart
You can attend an audit yourself, but you don't have to. You can authorize your accountant, lawyer, or other tax professional to handle it without you. Often this is the best way to prevent the audit from escalating beyond the original areas that attracted the IRS's interest. Experienced professional advisors are less likely to become emotional or to make statements that lead to more IRS questioning.
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If you're in the middle of an audit and find that you are missing some records or need to consult an expert, you can stop the audit midstream and reschedule it for a later date. And, if you run into difficulties with the agent conducting the audit, you can ask to speak to his or her supervisor.
If you disagree with the ultimate results of the audit, there are numerous avenues of appeal that you can pursue. However, at that point, we recommend that you talk to a tax professional to gauge the likelihood of success and the best strategy to use in your particular case. For more information, see the IRS's free Publication 556, Examination of Returns, Appeal Rights and Claims for Refund, available by calling 1-800-TAX-FORM.
As rare as audits are, the dreaded knock on the door from the IRS agent is even rarer. Individuals are almost never audited in this way. On-site or "field audits" are used mainly for larger businesses, particularly when records are not portable. If you do get a notice of a field audit, professional help is definitely recommended.
If you disagree with the ultimate results of the audit, there are numerous avenues of appeal that you can pursue. However, at that point, we recommend that you talk to a tax professional to gauge the likelihood of success and the best strategy to use in your particular case. For more information, see the IRS's free Publication 556, Examination of Returns, Appeal Rights and Claims for Refund, available by calling 1-800-TAX-FORM.
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