Common questions about IRS audits

If you have been selected by the Internal Revenue Service to have your financial records audited, you may be wondering not only how you were chosen, but also what the audit process entails.

When being audited by the IRS it is important to understand what the auditors are looking for as well as what your legal options are should they determine that your finances have not been reported accurately.

What is an audit?

When the IRS decides to examine an individual’s or other entity’s financial accounts to verify that the information presented on the filed tax returns is reported in accordance with the tax laws, it is referred to as an audit.

How was I selected to be audited?

There are several ways that you may have been selected for audit. It could have occurred by random selection or perhaps the W-2 or Form 1099 that you reported did not match what your employer submitted to the IRS.

Another reason you might have been selected is due to an audit being conducted on a related party, such as a business part or investor. The IRS may be comparing the financial information you each reported regarding your business dealings to ensure that the transactions are being reported accurately.

What types of methods do auditors use?

An audit can be as simple as the IRS sending you a notice requesting certain documents that you would then mail back to their office. An audit may also be conducted in person in which you are interviewed by an auditor and your records are examined on site.

How will I know if I’m going to be audited?

If you have been selected for audit, the IRS will notify you by mail. It is also possible that in addition to a mailed notice you may receive a phone call from an agent.

The IRS will never email you concerning an issue with your tax return. If you receive an email or telephone call from someone claiming to be with the IRS and you do not receive an official notice in the mail, be aware that individual may be attempting to commit fraud.

What types of record will be requested?

The IRS will provide you with a detailed list of the specific documents that they need.

When your tax return is prepared, the law requires that the documents used for the preparation be retained for a minimum of three years from the date of the filing. The IRS will sometimes accept these records in an electronic format, so long as that format is compatible with the software that they use.

What rights do I have during the audit process?

During the audit, you should be treated in a professional manner by the agent. You have the right to know why the IRS is requesting financial information, how it will be used, and what the consequences are if the information is not provided.

You also have the right to representation and to appeal any disagreements over the presentation of your financial information.

If you have received a notice of audit from the IRS, it is important to understand your rights. For advice on handling an audit, contact an attorney experienced in IRS defense.

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