Are You Facing An IRS Tax Audit?
It may evoke dread and anxiety for taxpayers when they face an upcoming IRS tax audit. These feelings may be justified, and they may not know where to begin to prepare for the audit. However, knowing where to begin, early preparation, and/or having a tax practitioner may help alleviate some of the taxpayer’s stress.
What is an IRS tax audit?
An IRS tax audit consists of in-depth examination of the taxpayer’s tax return, and questions may arise as to the accuracy of the income, deductions and credits that were claimed. The IRS will want the taxpayer to provide proof of the amounts they claimed on the filed return. This may include providing the documentation used to prepare the tax return. A taxpayer may have questions regarding the information they used and need assistance in understanding what records are needed for the audit. A tax practitioner can assist the taxpayer to identify the pertinent documentation and assist with organizing it for an IRS audit.
What may trigger an IRS tax audit?
- Income discrepancies between what has been reported by other parties versus what has been reported on the tax return.
- Returns that reflect higher income/expense values may garner more review.
- Credit and/or deductions that do not look correct, are unusual or are higher than expected.
- Random selections to promote compliance.
The Various types of audits:
- Correspondence audits. These are conducted through the mail. The IRS may just ask for clarification or some additional information on certain items on the tax return.
- Office audits. The IRS will require the taxpayer to come into the IRS office to review taxpayer’s records and discuss the return.
- Field audits. These audits can be held at the taxpayer’s residence and/or place of business and can be very in-depth.
Engaging a tax professional may not only alleviate some stress but the tax practitioner has the ability to attend the audit meetings on behalf of the taxpayer. If applicable, the tax practitioner may attend the meetings at the IRS location or they may arrange to conduct the meetings at the practitioner’s office.
How to navigate an IRS tax audit:
- Be organized. The taxpayer will need to compile records and determine exactly what the IRS wants to examine.
- Respond quickly to any IRS contact. The taxpayer needs to make sure that they comply with all deadlines and requests to communicate.
- Be respectful and calm. The situation may be overwhelming to the taxpayer but they must try to remain as calm as possible.
Overall, getting audited by the IRS may be a very stressful situation for most taxpayers. It is crucial for the taxpayer to understand what is expected of them, work to prepare for the audit, and meet any and all communication deadlines. If the taxpayer feels overwhelmed and does not know where to start, it may be beneficial to consult with a tax professional. A tax professional can help determine where to start by determining the type of tax audit the taxpayer is facing, reviewing the tax return and the request from the IRS, and dealing with all communications with the IRS.
