Tax Audit Intro:

What Goes on During an Audit?

  • Basically, the IRS conducts an audit in order to determine if you have underreported your income and/or the exemptions, deductions and credits you claimed on your return are valid.
  • It is possible to negotiate the issues in question with the auditor.
  • If at anytime you feel that the audit is not going well or would like to enlist the help of a tax professional, you can ask for a recess to acquire the appropriate consultation.
  • Do not expect to come out of an audit unscathed, chances are you are going to be found deficient in your taxes.
  • If you believe your auditor is treating you unfairly or you do not agree with his findings, you may request to speak with a supervisor.
  • If you need more time to prepare for an audit, request it. Delaying an audit usually works to your advantage anyway.
  • Read IRS Publication 1, otherwise known as the Taxpayer's Bill of Rights, before attending your audit.
  • Try to keep the IRS from holding the audit at your place of business or your home. Request to have the audit held at the IRS office or at your tax professional's office, if you chose to hire one.
  • Do not bring any excess documentation with you that does not pertain directly to the year in question or was not expressly requested in the audit notice.
  • Do not show the auditor any prior tax returns. He may find reason in these returns to warrant auditing of them too.
  • An audit must be completed by the IRS within three years after the return has been filed, unless tax fraud or significant underreporting of income has occurred.
  • Should the subject of tax fraud come up during an audit, do not attempt to handle the situation yourself without the advice and counsel of a tax attorney. Tax fraud can amount to some serious penalties and it is most likely in your best interest to seek a formidable alliance before continuing.
  • Do not talk anymore during the audit than is absolutely necessary, especially if you are nervous. People have a tendency to run amok at the mouth when placed in a stressful situation and you could wind up with your foot in your mouth.
  • If you are missing receipts or other forms of documentation, you are allowed to reconstruct them.
  • Field audits tend to be much more intense than office audits. If you are denied a request to hold the audit at a different location, it is probably in your best interest to hire a tax advisor to help during your audit.
  • If you disagree with the results of an audit, you are entitled to appeal the findings, either within the IRS Office of Appeals or in Tax Court.