Paul Horton: IRS Audit

We can help you if you’re undergoing an IRS Audit. If you’ve received papers, call us to discuss your situation right away.

What is an IRS audit?

An IRS audit is a review/examination of an organization’s or individual’s accounts and financial information to ensure information is being reported correctly, according to the tax laws, to verify the amount of tax reported is accurate. The tax lawyers are seasoned and experienced in tax controversy and can successfully guide you through an IRS audit.

IRS Audit Selection

Selecting a return for audit does not always suggest that an error has been made. Returns are selected by the IRS using a variety of methods, including:

Random selection and computer screening – sometimes returns are selected based solely on a statistical formula.
Document matching – when taxpayer records, such as Forms W-2 or Form 1099, don’t match the information reported.
Related examinations – returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit.

Audit Methods

An audit may be conducted by mail or through an in-person interview and review of the taxpayer’s records. The interview may be at an IRS office (office audit) or at the taxpayer’s home, place of business, or attorney’s office (field audit). The IRS will tell you what records are needed. Audits can result in no changes or changes. Any proposed changes to your return will be explained by a document called an exam change report.

IRS Audit Notification

Should your account be selected for audit, you will be notified in two ways:

By mail, or
By telephone

In the case of a telephone contact, the IRS will still send a letter confirming the audit. The letter notifying you that your return was selected for audit will also contain an information document request (IDR) that will outline which line items will be examined and inform you which documents are being requested from you.

Your Rights During an Audit

You have significant rights as a taxpayer in the examination, appeal, collection, and refund processes. These rights include:

A right to professional and courteous treatment by IRS employees.
A right to privacy and confidentiality about tax matters.
A right to know why the IRS is asking for information, how the IRS will use it and what will happen if the requested information is not provided.
A right to representation, by oneself or an authorized representative (tax attorney).
A right to appeal disagreements, both within the IRS and before the courts.

It is critical that you obtain representation by a skilled tax attorney who will ensure that your rights are protected during any contact you have with the IRS.

IRS Audit Length

The length of each audit varies depending on the type of audit, the complexity of items being reviewed, the availability of information being requested, the availability of both parties for scheduling of meetings, and your agreement or disagreement with the findings.

Records Needed

You will be provided with a written request for specific documents needed. The law requires you to retain records used to prepare your return. Those records generally should be kept for three years from the date the tax return was filed.

The IRS does accept some electronic records. If records are kept electronically, the IRS may request those in lieu of or in addition to other types of records.

Audit Determinations

An IRS audit can be concluded in three ways:

No change: an audit in which the taxpayer substantiates all of the items being reviewed and results in no changes.
Agreed: an audit where the IRS proposes changes and the taxpayer understands and agrees with the changes.
Disagreed: an audit where the IRS has proposed changes and the taxpayer understands, but disagrees with the changes.

What Happens When You AGREE With The Audit Findings?

If you agree with the audit findings, you will be asked to sign the examination report or a similar form depending upon the type of audit conducted.

If money is owed, there are several payment options available. If you cannot make a full payment right away, you are allowed to establish an installment agreement with the IRS to make monthly payments that are affordable to you. You also may qualify for an offer in compromise or innocent spouse relief.

What Happens When You DISAGREE with the Audit Findings?

A conference with a manager may be requested for further review of the issue or issues. In addition, Appeals Mediation Programs or an Appeal request may be filed. If you cannot resolve your disagreement with the manager, you are entitled to use every avenue to dispute the proposed deficiency.