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The IRS Audit Process: What to Expect

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You’ve just found out you’re being audited by the IRS, and you’re probably feeling overwhelmed.

Fortunately, at Milikowsky Tax Law, we know that having a clear idea of how an audit works greatly improves your chances of it going smoothly.

We’ve answered your top three questions about what to expect from the process, to help you feel prepared. Read on to learn the basics that you need to know before your audit begins.

Why Was I Selected?

Just because you’re being audited does not necessarily mean there is something wrong with your tax return.

The IRS chooses many returns at random based on a statistical formula. As part of their research, the IRS audits a random sample of returns to update return selection information. This allows for the creation of tax return “norms,” which other returns can be compared against.

Similarly, if another taxpayer you associate with is being audited — say your business partner or an investor — you may be selected for audit because you have transactions with them in your return.

On the other hand, some types of audit are more serious, such as an office audit or a field audit. If you are selected for one of these audits, there is likely something missing or unusual about your return that the IRS needs to look into. While this might not be welcome news, it still doesn’t mean that you’re necessarily going to end up in trouble.

No matter the reason you were selected, it’s important to stay calm and speak to an experienced tax attorney to help you navigate your specific situation — especially if you have any concerns about why you’re being audited.

How Will the Audit Work?

Depending on the type of audit, you will deal with the IRS either by mail or in person. For all types of audits, the IRS will first notify you of the audit and provide instructions in a letter.

A correspondence audit is the lowest level of audit, as you are given the chance to solve the issue by mail. Fill out the paperwork, include the requested documentation, and send everything back in a timely manner. This will help establish to the IRS that you take this audit seriously.

An office audit takes place at your local IRS office, while a field audit is conducted at your home or office. You will be asked to provide a list of documents and records, and although these vary from case to case, they may include:

  • Bills, receipts, and checks
  • Legal documents
  • Loan agreements
  • Employment documents
  • Medical and dental records
  • Travel expenses

The auditor will evaluate these items and ask you a series of questions about them before coming to a conclusion. The length of the audit will vary depending on how complicated your case might be — however, an office audit is usually completed within one day.

If at any point you need more time to respond to any IRS requests, be sure to ask for an extension immediately. Because documentation is essential, you may want to talk with a tax specialist if your bookkeeping has not been well organized.

What Happens When the Audit is Over?

Once your audit has come to an end, the auditor will present you with one of three outcomes: you owe money to the IRS, you are owed money, or nothing is owed by either party.

You can decide to agree to the charges or not. If you agree with the audit, you’ll choose one of several payment options to pay off your assessment. If you disagree, your tax attorney can help you file an appeal; you can also request to meet with an IRS manager, or seek mediation with the IRS.

If you disagree with an IRS decision, having an experienced tax attorney on your side will make all the difference. When it’s you against the federal government, an expert in tax law will be able to represent your best interests and help improve your assessment — and that’s where we come in.

Contact Milikowsky Tax Law today and schedule a free consultation about your IRS audit.