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The IRS Audit Q & A

Part 1: IRS Audit Basics

You’ve maybe heard of businesses or individuals who have encountered the dreaded IRS audit. Just the term “IRS audit” is enough to make most of us break into a cold sweat. We’re here to help lessen the fear and help you understand what can happen during an audit.

Here is what you need to know about an IRS audit and how to prepare should you ever be audited. This is the first of a two-part series on the basics of an IRS tax audit. Your individual circumstances may vary so it’s always best to check with a qualified tax professional regarding your specific audit matter.

What is an audit? The term “audit” refers to the process of reviewing an individual’s or business’s financial records to ensure all information is accurately reported to the IRS.

How will I be notified? Taxpayers are notified in one of two ways: letter or phone call. In the event you get a phone call from the IRS, you will also receive a letter confirming the nature of the call. Whatever you do, don’t disregard the audit notice. Follow up with all requested information before the deadline.

My tax returns have been accurate. Why did I get selected for an audit? In many cases, audit selection is random and unrelated to whether or not a return in accurate. In other cases, you may have been selected due to a discrepancy in reporting information on your income forms (W2, 1098 or 1099, for example) provided by your employer(s) and what you reported on your return.

In other instances, your tax return may have been flagged because you have conducted business (as a partner or investor) with another person or entity who is also being audited.

I got an audit notice. What happens now? What happens next largely depends on what type of information is needed, and where the audit will be conducted. An informational audit involves you sending in documentation that is requested by the IRS. There will be no need for a face-to-face meeting at that time. Once your documentation is reviewed, you will be notified by the IRS of their decision and any further action you will need to take. Quick and somewhat painless.

In a field audit, you will meet with the IRS auditor in your home, place of business, or at your tax professional’s office. Here is where your organizational skills will pay off. Bring your tax records and supporting documentation with you to the meeting site. IRS examiners are human, too, and will appreciate it when you are able to whip out the needed documentation quickly and hand it to them. Don’t be that person with the overflowing shoebox of scattered paperwork.

An office audit involves meeting with the examiner at an IRS office, usually the one closest to your home or place of business. Again, have  all the requested information organized and at your fingertips.

Regardless of the type of audit, you must meet all deadlines for replying to requests for information and keep all appointments with your IRS examiner. Be ready to provide all the requested supporting documentation and information.

And yes, you do have rights. While an audit isn’t the nasty experience you may have heard of from friends, family and random strangers, it does help to know that you do have rights and that you can have representation during your tax audit.

Tomorrow: What Happens Next?

If you’ve been selected for an IRS audit, you don’t have to go it alone. Our qualified tax professionals¬† can help you through the IRS audit process and answer your questions. Give us a call at (888) 224-3004. You can also chat with us by clicking the white “Start Chat” button in the upper right-hand corner of our website.

 

 

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