What to expect when the IRS sends an audit notice

What to expect when the IRS sends an audit notice

This article looks at the three audit processes and how to react if one receives an audit notice.

For most people, getting audited is something that will never happen. But for self-employed and wealthy individuals, the risk of being audited is actually quite high. As Fox Business reports, while only one percent of all tax returns were audited in 2013, that figure rose to 10.85 percent for those making more than $1 million. Even for people making less than that, certain red flags can lead to an audit. While receiving an audit notice can be scary, it is important to keep some points in mind when dealing with the IRS.

The three audit types

In movies and TV shows, audits are usually presented as auditors rummaging through a person’s office and personal records. The fact is that in most cases the person being audited never actually meets with the auditor. As US News & World Report notes, 80 percent of audits are conducted through correspondence, meaning that it is carried out entirely through the mail.

The other two audit processes are office and field exam audits. During an office audit the person being audited will be required to meet with the auditor at the IRS office. This process is usually completed in an afternoon and it is designed to go over specific issues with the individual’s return. The field exam is when the auditor comes to the place of work or residence of the person being audited, but this type of in-depth process is usually only utilized in especially complex cases or where serious tax-related issues are at stake.

How to react

When faced with an audit, far too many people believe that the best way to react is to simply give the IRS as much information as possible. However, doing so could be counterproductive. For one, the person being audited is only required to provide the information asked for by the auditor. Providing more information could inadvertently land one in even more trouble and may uncover tax problems that the IRS had no plans on pursuing.

Furthermore, providing more information than is necessary often wastes everybody’s time, including the auditor’s. That additional information may lead to new lines of inquiry that the auditor will have to investigate. Even if those inquiries do not lead anywhere, they will have wasted the time (and likely the money) of both the auditor and the person being audited.

Getting legal representation

Dealing with the IRS can be a difficult process, especially since many people who are being audited have little knowledge about what their rights are during the audit. Fortunately, a tax attorney can help those who have tax problems and concerns, including individuals who are caught up in an audit. A tax attorney will be able to deal directly with the IRS on the client’s behalf and will be able to fight to help that client resolve his or her tax issues quickly and cost-effectively.