If you receive notice from the IRS stating that your return has been selected for an audit, it is time to seek help from a tax professional.
During a tax audit, you must be prepared to explain the nature of your income and substantiate the expenses and deductions claimed on your tax return. It is likely that the examination of one tax return may lead to other tax years being opened for audit. In order to properly defend yourself, you should seek a tax professional who has extensive knowledge of the tax codes, regulations, and procedures.
Types of Audits:
There are three main types of audits done by the Internal Revenue Service.
- The simplest is the correspondence audit. You will get a letter from the IRS requesting that additional information be mailed to them or that a proposed additional amount of tax be sent in.
- The second level of audit is the office audit. You will be asked to bring certain information to the IRS office for review.
- The most complete audits are called field audits. They are conducted at your home or place of business. It is best to avoid these if possible. Once the agent is at your home or place of business, he or she has much more to see and ask about.
Taxpayer Bill of Rights:
- A taxpayer has the right to be represented by a tax attorney, enrolled agent, or CPA during the audit. If you are in an audit interview and ask to consult such a person, the IRS must stop and reschedule the interview in most cases.
- You have the right to know why the IRS is asking you for information, how the IRS will use it, and what happens if you do not provide requested information.
- A taxpayer has the right to make an audio recording of the audit interview if advance notice is provided.
- The IRS may conduct only one inspection of a taxpayer’s books unless the taxpayer requests another examination or the IRS provides written notice.
Already Been through a Tax Audit?
If you have already been through a tax audit which resulted in additional taxes, penalties, and interest being assessed, you do have options besides paying the tax liabilities in full. These options include filing an appeal, audit reconsideration, and/or an offer in compromise