The IRS can initiate three types of audits:
- Correspondence audit. Conducted via writing and not face to face with an auditor.
- Office audit. You’ll generally have to meet with an auditor in person. Expect to meet at an IRS office and for the experience to last between two and four hours.
- Field audit. The auditor may come to your place of business or records office. Expect this to last a day or longer.
Depending on the type of audit, the taxpayer or their representative will use different strategies to navigate it. The initial correspondence will often confirm which parts of your tax return are being questioned.
When it comes to communicating with the auditor, only answer the questions you’re asked, whether it’s in an in-person audit or via written response. Try to limit rambling and kill the urge to divulge too much. Do not give them any more information than you have to. If they ask you a yes-or-no question, answer ‘yes’ or ‘no.’
If you’ve hired a professional to help you navigate the audit, you will likely sign over power of attorney, and you may never even speak to the auditor – your representative will do that for you.
Generally, the IRS can audit returns filed in the last three years, but if it identifies a substantial error, it may look back further, typically no more than six years, according to the IRS. This is why it’s important to keep records and supporting tax documents stretching back at least three years. You may be asked to supply them during the audit.
Whether or not to hire a professional to represent you is your choice. But it can be worth the cost and shields you from ever speaking to the auditor. It’s really important to get an experienced representative in any situation.
If you decide to hire a tax professional, consider hiring an expert such as an enrolled agent, certified public accountant or attorney who specializes in audit representation. Auditors would want to work with a tax professional because they talk the same language.
Remember that you have rights when you’re being audited by the IRS. Those include the right to professional treatment by the IRS auditor and a right to representation. You also have a right to appeal within the IRS and the courts.
Finally, a word to the wise: If the result of an audit is that you owe additional tax to Uncle Sam, it may also impact your state return. Look into amending your state return as soon as possible to limit fees and penalties.
Once there is a determination of additional tax due after the audit is complete, there are many possible solutions, one of the outcomes is offer in compromise (settlement) option.
Let me help you determine the best approach to handling the audit. I’ve spend the last 20 years fighting and winning against the IRS. I know how to deal with the auditors and how to get them to see my side of the issue. Let me take the stress out of dealing with the IRS. Don’t wait till they come to your house call me today, Alla Tenina 213-596-0265