What Should Do If I’m Audited By The IRS?

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When receiving a tax audit notice from the IRS, it’s important to prove that the initial return was filed correctly and completely to avoid additional payments and interest penalties. If it was not filed correctly, it is even more important to have an attorney help defend your position.

What is a Tax Audit?

During a tax audit, the IRS examines financial records of an individual or business to ensure federal taxes were filed accurately. If the audit proves that the initial tax return was filed correctly and completely, the IRS will not ask for further information. If errors or calculations are found — either innocent or purposeful — the tax payer may be subject to payments and interest penalties when the return is recalculated by the IRS.

There are different types of tax audits, each with certain requirements. The type of audit may determine specific documents that are required and where to send them. A Correspondence Audit may require checks, receipts and financial documents to be mailed to an IRS service center. An Office Audit is conducted at a local IRS office, while a Field Audit is conducted at a taxpayer’s home or place of business. The most complex type of audit is the Taxpayer Compliance Measurement Program (TCMP). It requires every part of a tax return to be backed up by documents, including both birth and marriage certificates. A TCMP audit is typically conducted to update the data used by the IRS computer scoring program.

Reasons for a Tax Audit

Typical reasons for tax audits include:

  • Figures that the taxpayer reported on the return don’t match information on W-2s, 1099s and cash wages reported to the IRS
  • The tax return shows high deductions relative to current income or inconsistent with previous years’ incomes
  • The taxpayer reports financial transactions with another individual or business that has been audited
  • Unfiled tax returns
  • Returns are flagged by IRS computer programs that assign “scores” to returns with above-average withholding
  • Random selection

Tax Audit Process

Taxpayers who are selected for an audit typically receive a letter from the IRS informing them of the audit and the reasons for conducting it. All IRS letters or notices contain a number in the upper right-hand corner that references specific issues with the tax return.

Once a tax audit notice is received, and the type of audit is explained, it’s essential to gather relevant documents. If necessary documents are missing, it’s important to request duplicates, since tax auditors will not accept excuses for missing or lost records. Documents that need to be mailed should be copies, not originals, only what is requested.

It is always suggested to have an attorney represent you in an audit. You should never answer an IRS examiners questions without counsel. Contact Gordon Law Group at 847-580-1279.