What Happens When IRS Audits You?

Careful preparation of your taxes can help you avoid an IRS audit.

IRS Notice

When the IRS calculates that the amount of income, expenditures and deductions you claim does not match the records of your employer or otherwise looks out of balance, this governmental body may want to audit your records to determine where the inconsistency lies. It does not necessarily mean that the IRS believes you are trying to cheat on your taxes. It simply means that, based on the information you and your employer have provided, the calculations you have stated on your tax documents do not appear be to accurate. When this happens, the IRS will mail you a letter notifying you of its decision to take a closer look at your financial statements from the previous year. This is called a correspondence audit, which is the most common form of IRS audit unless you are a small business owner.

Contact Your CPA

Once you have received a letter stating that the IRS wishes to conduct an audit, you should contact your CPA or other accounting or tax professional right away. These experts should have extensive experience not only filing taxes, but in dealing with the IRS and the many issues that can arise during an audit. Chances are the tax professional will be able to pinpoint exactly why you are being audited, unless it is simply a random audit, which is conducted from time to time. Once the reason for your audit has been established, your tax professional will likely contact the IRS to try to resolve the issue. You should bring all of your financial records, including statements from accounts accruing interest, student loans accruing interest and all receipts from tax deductions or claims, when you meet with your tax professional. This way he can double-check your statements against the numbers on the tax form.

Ruling

Once you or your tax professional are able to speak to an IRS representative about your tax return, the IRS will make a ruling. This ruling will either state that your return is in proper order or that some adjustments must be made. These adjustments could result in a larger refund for yourself, or they may end up costing you money if the IRS finds that you did not pay an adequate amount of taxes. Taxpaying citizens have a right to appeal the IRS's decision. If an appeal is requested, the taxpayer, along with her tax professional, will either meet with the IRS representative's manager or have the case heard in U.S. tax, claims or district court.

resources