I’m being Audited

Treat the Agent with Respect.  IRS Revenue Agents are highly trained and very smart individuals. Though the process may appear adversarial, remember that they are just doing their job. Always be polite and courteous! Consider contacting the Agent early on to discuss scheduling, which will show cooperation.

Organize your Tax documents.   Put together an organized file of all tax returns (federal & state), all supporting documentation and IRS correspondence for the current year and prior years. Contact the return preparer for any missing information.  Generally, the statute of limitations is 3 years from the date you file the return.

Read the IRS Audit Technique Guides.  The IRS publishes Audit Technique Guides for various industries on their website as a guide for Agents. Once you understand what the examiner will be looking for, you can identify and anticipate potential problem areas on your tax return.

Consider postponing the Audit.  If you are not prepared, don’t try to wing it. The more organized you are, the easier the auditot’s job will be and the more likely it will appear that you are cooperating.

Hire a Representative.  This does not imply that you are guilty. In fact the Agent may appreciate dealing with a third party professional, who will be able to promptly responding the Agent’s request for information. If you are considering a reliance defense (that you relied on the advice of your tax preparer) you would want to hire an Attorney.

Chose a proper Location.  You should never have the audit in your home and generally not at your business, preferably having it at the office of your Representative, who will ensure that there is a designated work area that is comfortable for the Agent.

Always make Truthful statements.  You should avoid being misleading at all times. If you are unsure about something, you should say so or politely decline to answer the question at this time and reserve for a later date. If you hire a Representative, you generally would not have to attend the audit or answer questions directly.

Post-Audit consideration.  The IRS may issue a closing letter (with no changes) or a notice of deficiency. If you are not able to resolve the issue with the examiner, you may consider contacting the auditor’s supervisor or filing an appeal. If you agree to pay the tax due, you may consider appealing any penalties.

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