November 8, 2019

So, you’ve done your taxes and alas, the IRS has sent you a letter that you are being audited. The walls are caving in, you’re having panic attacks, and can’t possibly fathom what are you going to do. Take a deep breath and read this article on how to prepare for a tax audit. Rest assured that you don’t need to be nervous. IRS audits are just trying to figure out if incomes and figures add up right; it simply inquires of your tax return. The IRS its self says that an audit is,” to determine if income, expenses, and credits are being reported accurately.” Follow these steps and be prepared.

How do I handle an IRS audit?

The first step to handling an IRS audit is reading and acknowledging the notification letter. Don’t ignore the IRS letter, even though it might seem easier and tempting to ignore bad news. Read it, read slow, and read it one more time.

Check the letter is legitimate and actually notifying you of an audit. An IRS audit letter will come to you by certified mail, it will include personal information such as name, taxpayer ID, form number, employee ID number. Just because you receive a letter from the IRS doesn’t automatically mean you’re being audited.

Read which year in question they are auditing, and what documents specifically the IRS are asking for. Prepare all the necessary returns and explanations for the representatives.

Types of IRS Audits

There are different types of IRS tax audits. These are:

  • Correspondence Audit
  • Office Audit/In-person Audit
  • Field Audit
  • Taxpayer Compliance Measurement Program Audit

Preparing for an in-person audit

There are steps you can take when preparing for an in-person interview. This is an interview where you physically have to be in the IRS office and speak with IRS employees. The IRS may question abnormally high deductions, and ask to see proof.

Carefully prepare for this office audit by gathering the necessary returns and explanations that were requested in your IRS letter.

Once in this audit, don’t say more than what is asked. Do not offer up any extra documents other than what you were asked to bring. The less you say the better, because saying more leads to more questions.

It is important to know that you do have the right to have an attorney present if you feel that it is needed.

Preparing for a correspondence audit

A correspondence audit, also known as a mailed in audit, is usually just the IRS requesting additional information relating to your tax return, such as receipts or canceled checks. In many cases this audit is just asking you about a simple mistake that you can correct by mailing in all the correct documents. If you’ve read your letter carefully and provided the correct documents, then these audits can be simply resolved.

Preparing for a field audit

The last type of IRS audit is a field audit, where the IRS may actually come to your home or to your job. This can be scary but remember to breathe and don’t offer information if you aren’t fully prepared. Remember if you feel that you need an attorney or tax professional you can request to have the audit done in their office.

Tips for preparing for an IRS audit

Understand the issue

To better prepare yourself for any of these types of tax audit, read up on the tax laws that are specific to the problem. Knowing this information will better prepare you for questions asked by the auditor and leave them more satisfied with your answers.

Be polite & honest

When being questioned be polite and courteous and answer each question truthfully. It is not wise to lie to the IRS.

Gather the right documentation

Make sure that all the documents presented are accurate, clear, and on time. Be sure you have all the documents at the auditing. If you have all the correct information the auditing process will run much smoother.

Request more time

If you feel that you need more time to prepare for the audit you can request it. Don’t hesitate to let the IRS know. You can go on their website and request more time to prepare.

What Happens After an IRS Audit is Done?

Once all the auditing is wrapped up you will receive an examination report, which is wise to look over carefully for anything that might confuse you. Don’t hesitate to call the IRS and ask about anything you need to clarify. If you disagree with a finding let them know, so that you and the auditor can come to a compromise.

If you follow these tips then the audit process will be a breeze, or at least a little easier to handle.

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You can learn more about the different types of IRS audits and What Happens in an IRS audit in our dedicated blog post.