Audit Defense

An IRS Audit is a process used by the IRS to verify the accuracy of a tax return by confirming specific items reported on the return. Although it can be intimidating to receive an IRS Notice announcing that your tax return has been selected for examination, the receipt of the written notification does not mean that you have made an error or imply that you have done something dishonest. Audits are simply the procedure used by the IRS to determine whether a taxpayer has properly reported income and taken the correct deductions. Although some tax returns are more likely to be audited than others, a return can be selected for audit in a variety of ways, including random sampling. The most important thing to remember upon receiving notification that your return has been selected for an IRS Audit is not to panic. Read the notice carefully and provide the required documentation within the specified time period. Because of the complexity of the tax code, it may be a worthwhile investment to enlist the assistance of a licensed CPA who specializes in audit representation before submitting a response or meeting with an IRS agent. Many IRS Audits actually result in a refund or an acceptance of a return without change when they are handled correctly.

Important things to know about IRS Audits:

  • If a taxpayer fails to respond to an official IRS Notice announcing an audit, the IRS can automatically adjust the tax liability.
    Although many audits result in no additional tax assessments, a poorly conducted audit can result in a large additional adjustment which, together with penalties and interest, can equal as much as 100% of the original assessment.
  • If the IRS assesses additional taxes and interest, the adjustments are usually matched by the State.
    Since it is the legal responsibility of the taxpayer to substantiate the income and deductions identified by the audit, be sure to provide all of the required documentation, replacing missing records when necessary.
  • If you do not agree with the results of an audit, it is your right as a taxpayer to submit an appeal to the IRS Appeals Division within 30 days of receiving the auditor’s report.