What you should know when faced with a tax audit by the IRS

On Behalf of | May 29, 2024 | Audits

Facing a tax audit by the IRS can be a daunting experience, but understanding the process and knowing how to prepare can help alleviate some of the stress that you may be feeling. 

An IRS tax audit seeks to verify that all of the income and deductions that you have reported on your tax return are accurate. Audits can be triggered randomly or as a result of certain red flags such as large deductions, unreported income or discrepancies between your tax return and other financial information the IRS has on file.

Types of audits

There are three primary types of IRS audits:

  • Correspondence audit: This is the most common type and is conducted by mail. The IRS will request additional information or documentation to support specific items on your tax return.
  • Office audit: This involves visiting an IRS office to meet with an auditor. You’ll need to bring the required documentation to support your tax return.
  • Field audit: This is the most comprehensive type and involves an auditor visiting your home or business to examine records in detail.

Once you’ve been notified that you’re being subjected to an audit, start by carefully reviewing the tax return in question. Understand each item that has been flagged and gather the relevant documentation to support it. You’ll also want to compile all necessary documents, such as receipts, bank statements, etc. in an orderly manner. Proper organization can help the audit process go more smoothly.

Navigating the audit

Once you receive a notice from the IRS, respond by the deadline specified. Ignoring the notice will not make it go away and can lead to additional penalties. With that said, you don’t have to navigate this process alone. You can seek personalized legal assistance “from go” to better ensure that your case is resolved favorably. 

To that end, your legal team will encourage you to provide accurate information and be cooperative with the auditor’s requests. However, you’ll only want to provide the information specifically asked for and avoid volunteering additional information that could complicate the audit.

Once the audit is complete, you’ll receive an audit report outlining any proposed changes to your tax return. Review this report carefully. At that point, your legal team will be able to advise you as to whether it makes sense to pay any amount owed or to appeal the IRS’s decision.