If you received an audit notice from the IRS, here are some things to know to make sure your experience is as painless as possible. The last thing you want to do is ignore the request for documentation. Even if you do not have what is requested, you can avoid further trouble and unnecessary expense by contacting the examiner and requesting additional time to comply.
Keep in mind that just because you’ve been selected for an audit doesn’t automatically mean you’ve done something wrong. Tax returns are selected in a variety of ways to include random computer selection, document comparison, or related examinations. The IRS protects taxpayers by providing certain rights, when it comes to audits. The first is “the right to professional and courteous treatment by IRS employees, the right to privacy and confidentiality about tax matters, the right to know why the IRS is requesting information, how the IRS will use it, and what will happen if requested information is not provided, right to representation, by yourself or by an authorized representative, right to appeal disagreements, both within the IRS and in court” (Irs.gov/pub 1). If you experience a problem regarding your rights as a taxpayer, you can contact the taxpayer advocate for help.
Being audited is one reason it’s important to keep records to support your credits and deductions for three years from the date of your return(s). One of the most difficult aspects of going through an audit is having to gather the required documents to substantiate your position. Remember, audits are conducted to document what is on your return with evidence. Not having the necessary records could result in adverse or unwarranted results that could cost you money.
Audits are typically conducted over the phone or in person at your local IRS office, home or office, or your tax professional’s office, depending on your situation. The IRS will send an audit notice by phone or mail, giving you plenty of time to prepare. If your audit results in changes to your return, those changes will be explained in detail and you will be provided with instructions if you choose to appeal the IRS findings. If you agree with the results of the IRS audit, you will be asked to sign the examination report or a similar form.
If you find yourself with a tax liability after being audited and are unable to make a full payment, the IRS offers several payment options designed to help taxpayers in financial difficulty. See Publication 594 on irs.gov for more information on the collection process. Remember, don’t be afraid that the IRS will honor them. In most cases, negative results stem from ignoring prompts and/or not asking for help when you need it.