Understanding the audit process

If you received an audit notice from the IRS, here are some things to know to make sure your experience is as painless as possible. The last thing you want to do is ignore the request for documentation. Even if you don’t have what is requested, you can avoid further trouble and unnecessary expense by contacting the examiner and requesting additional time to comply.

Keep in mind that just because you have been selected for an audit does not automatically mean that you have done something wrong. Tax returns are selected in a number of ways to include random computer selection, document comparison, or related examinations. The IRS protects taxpayers by granting certain rights, when it comes to audits. The first is “the right to courteous and professional treatment by IRS employees, the right to privacy and confidentiality on tax matters, the right to know why the IRS asks for information, how it will use it, and what will happen if the requested information is not provided, the right to representation, by oneself or an authorized representative, the right to appeal disagreements, both within the IRS and in court “(Irs.gov/pub 1). If you have a problem regarding your rights as a taxpayer, you can contact Taxpayer Advocacy for help.

The possibility of being audited is one of the reasons why it is important to keep records that support your credits and deductions for three years from the date of your return. One of the most difficult aspects of going through an audit is having to gather the necessary documents to support your position. Remember, audits are done to document what is on your return with evidence. Not having the necessary records could result in adverse or unwarranted results that could cost you money.

Audits are typically conducted over the phone or in person at your local IRS office, your home or office, or your tax professional’s office, depending on your situation. The IRS will send you an audit notice over the phone or by mail, giving you plenty of time to prepare. If your audit results in changes to your return, those changes will be explained in detail and instructions will be provided should you choose to appeal the IRS findings. If you agree with the IRS audit findings, you will be asked to sign the examination report or a similar form.

If you run into a tax liability after being audited and cannot make the full payment, the IRS offers several payment options designed to help taxpayers in financial distress. See Publication 594 on irs.gov for more information on the collection process. Remember, don’t be afraid that the IRS will respect them. In most cases, negative results stem from ignoring warnings and / or not asking for help when you need it.

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