What to do if I am Audited by the IRS
What to do if I am Audited by the IRS, but I have No Receipts!
Nothing is more stressful than a Notice of Audit from the IRS or State for income, sales or employment taxes. Simply put, it means your records are going to be examined and any potential mistakes (both good and bad) could possibly come to light. The point of an audit is to verify your records are correct; this is a key point! We have represented many clients in audit where the end result was the IRS owed our client money. While a refund is not always the case, we find many clients underreport expenses or miss credits. While an audit is clearly not something you wish for, with the proper representation, it MAY not need to be feared. That being said, if you take the right steps you can get past this part of your tax life in no time at all.
What is a Tax Audit?
A tax audit is an accounting procedure where the IRS examines your individual or business financial records to ensure you filed your tax return accurately. If you prove that your initial return was complete and correct, you won’t be asked anything further. However, if the IRS finds errors or a purposeful misreporting, you’ll have to pay the recalculated return amount and any interest and/or penalties.
Tax Audit by Mail or Correspondence Audit
A correspondence audit, or an audit received by mail, is an audit that is conducted through correspondence. In a correspondence audit the IRS sends you a notice directing you to provide information and support for one or several items on the return. In these notices, there will be a due date provided and it’s of the utmost importance you do not miss these deadlines.
Tax Audit in Person
There are three different types of in person audits.
1. Office Audit: the IRS Service Center asks you to bring certain documents in to your local IRS office. The audit is conducted there.
2. Field Audit: an IRS agent comes to your home or place of business to conduct the audit in person.
3. Taxpayer Compliance Measurement Program Audit: (TCMP) this is the most extensive type of audit, where every part of your tax return must be substantiated by documents, including birth and marriage certificates. The primary purpose of this audit is to update the data used to write the computer scoring program.
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If I am Audited, Does It Mean I Am in Trouble?
Your taxes may be audited for a variety of reasons, including: