What to Do If You Get a Notification of an IRS Tax Audit

If the IRS has alerted you that your taxes are being audited, there are several actions you may do to ensure that the audit goes as smoothly as possible.

What you’ll discover:

Inquire as to why your return was chosen for audit.
Decide How You Will Be Audited Collect Your Documents
Hire a Tax Attorney

What does it signify if you recently got a notification that your taxes are being audited? A tax audit is an accounting practice in which the IRS checks your personal or corporate financial records to confirm that your tax return was submitted correctly. If you can demonstrate that your original return was full and accurate, you will not be questioned further; nevertheless, if the IRS discovers mistakes or intentional misreporting, you will be required to pay the revised return amount as well as any interest penalties. If you get an audit notification, follow these procedures to immediately remedy the matter.

Inquire as to why your return was chosen for audit.

Although the IRS is required to notify you why your return was chosen, you must ask. Tax audits may occur for a number of reasons, including:

Particular activity on your return, such as cash earnings, 1099 and W-2 papers that do not match your reporting, large deductions in relation to your income, reports that are inconsistent with past years, and so on.

Connected audits, in when your report incorporates transactions with someone else who is being audited

Automated flagging, in which computer systems detect outlier “scores” on returns (ex: above average withholding)

Selection at random

In the top right-hand corner of every IRS Notices or Letters is a notice number. These figures will provide you with further information regarding the exact problem(s) with your tax return. You may restrict your focus and begin collecting relevant papers once you know what you are being audited for.

Discover How You Are Being Audited

There are several sorts of tax audits, each with its own set of criteria. Understanding how you are being audited can help you identify what papers you need, where to deliver them, and whether you require the services of a tax attorney.

Correspondence Audit: The IRS service center requests further information on a portion of your tax return. The IRS is looking for receipts, cheques, and other such documents.

The IRS Service Center requests that you bring specific papers to your local IRS office for an audit. The audit is carried out there.

Field Audit: An IRS agent visits your location to perform the audit in person.

Taxpayer Compliance Measurement Program Audit: This is the most thorough sort of audit, in which every aspect of your tax return must be supported by documentation, including birth and marriage certificates. The main goal of this audit is to update the data that was utilized to create the computer scoring algorithm.

It is very advised that a lawyer be present for both field audits and TCMP audits.

Collect Your Documents

After you know what is required of you, you may begin searching your records for pertinent receipts and papers. Never send in original or merely copy papers, and never send in more than is required. If you can’t discover essential documents, obtain duplicates right once since auditors will not accept the explanation that records are missing or lost.

After you have all of your copies and originals, arrange them. This is particularly important if you are facing an in-person audit—good organization tells the agent that you are a conscientious taxpayer, which may lead to the agent limiting the scope of their probe.

Hire a Tax Attorney

Contact the tax expert who prepared your return as soon as you get news of an IRS tax audit. He or she can explain the audit procedure to you and assist you in preparing. If you are still concerned about the audit, or if a field inspector is scheduled to visit your workplace, you should consult with an experienced tax lawyer.