In general the IRS has three years from the date of filing to audit your tax return. If you have omitted 25% or more of your income, the time to audit increases to six years. If you have not filed your return, or filed a fraudulent return, the IRS can audit at any time. Although statistically the chances of being audited by the IRS are low, it is best to be prepared. Following are some tips for preparing for an IRS audit.
1. Do not panic! Make sure it is actually the IRS and not a scam. The IRS will only notify you of the audit on official letterhead which will be sent by US mail. They will not call you, e-mail you, text you or knock on your door.
2. Read the letter to determine what years are being audited, and what information is being requested. The letter will also tell you how the audit will be conducted. In a “mail audit” all information is exchanged by mail. In a “field audit” an agent is assigned to the case and the audit is conducted at your home, place of business or the IRS office. Try to have the audit take place at the IRS office.
3. Hire a tax attorney. Most taxpayers will rely on the accountant who prepared the return to represent them at an audit. This is mistake as the accountant-client privilege is limited. First, the accountant must be a CPA for the privilege to apply. Second, there will be no privilege as to the information on the return nor the data forming the basis for the information on the return.
4. Do not handle the audit yourself or attend the audit with your representative. If you choose to represent yourself at the audit or attend with your representative you can be fairly sure that the IRS will ask you questions that should not be answered on the spot. Having only your representative at the audit will allow him/her to get back to the IRS with the answer after discussions with you.
5. If you still insist on representing yourself always remember the IRS IS NOT YOUR FRIEND! Do not engage in conversation with the agent. Anything you volunteer may end up hurting you. The IRS has only one reason for asking questions….to determine if you failed to report income or overstated deductions. Answer any questions honestly, but as succinctly as possible. There is no need to be overly helpful.
6. Gather and organize all the documents that were used to prepare the return to be audited. Review what documents have actually been requested by the IRS and provide the agent ONLY the documents that were requested. There is no need to volunteer documents that were not requested.
7. Provide the IRS copies of the documents, not originals. Make a list of the documents that were provided to the IRS and the date on which they were provided.
8. Comply with all deadlines imposed by the IRS and attend all meetings scheduled. If you cannot meet the deadline ask for an extension prior to the deadline.
9. Understand that you have the right to contest the auditor’s findings if you do not agree with them. In fact, if you do not agree with the IRS you have the right to contest the findings in Tax Court once all administrative appeals are exhausted.
10. Read all documents the IRS gives you. Many will explain what your rights are and the deadline to exercise those rights. If you do not act within the time specified you may lose important rights. Never sign any document the IRS asks you to sign without carefully reading it and, more importantly, understanding it.
Dealing with the IRS can be a very stressful experience for most people. With over 30 years of experience dealing with the IRS, I am available to make the experience as
pain-free as possible. I am always ready to help you should you be contacted by the IRS.