Dealing with the IRS
The IRS has several different levels of
audits. If questions arise about your math, items seem to be
omitted from your return, or your figures don't match those
on your W-2s, 1099s, or 1098s, the IRS may simply request a
correction or explanation by mail.
Respond to the request as quickly as possible and, if you
have doubts about the answer, consult your tax professional,
if you have one.
NOTE: The IRS makes mistakes,
too. Don't assume the IRS notice is correct. Check things
out. Computer-generated forms, which include the forms
most commonly sent out to deal with small errors, are
notorious for automatically adding penalties that may not
apply in your situation. If you are in doubt, call the IRS
and ask them about anything you don't understand.
The first level of inquiry that can truly
be considered an "audit" occurs when you get a letter
requesting that you come into the IRS office to review one
or more areas on your return. This is a true audit because
the IRS is asking for proof of items on your return that go
beyond your word. If you have kept records, including bills,
receipts, and canceled checks, you shouldn't worry. The IRS
may end up interpreting your situation differently than you,
but there is no crime in having differences of opinion.
Nevertheless, professional help may be in order with an
office audit, particularly if you yourself suspect that
there are errors or omissions in your tax return.
NOTE: You can attend an audit yourself, but you
don't have to. You can authorize your accountant, lawyer,
or other tax professional to handle it without you. Often
this is the best way to prevent the audit from escalating
beyond the original areas that attracted the IRS's
interest. Experienced professional advisors are less
likely to become emotional or to make statements that lead
to more IRS questioning.
If you're in the middle of an audit and
find that you are missing some records or need to consult an
expert, you can stop the audit midstream and reschedule it
for a later date. And, if you run into difficulties with the
agent conducting the audit, you can ask to speak to his or
her supervisor.
If you disagree with the ultimate results of the audit,
there are numerous avenues of appeal that you can pursue.
However, at that point, we recommend that you talk to a tax
professional to gauge the likelihood of success and the best
strategy to use in your particular case. For more
information, see the IRS's free Publication 556, Examination
of Returns, Appeal Rights and Claims for Refund, available
by calling 1-800-TAX-FORM or at the IRS web site.
As rare as audits are, the dreaded knock on the door from
the IRS agent is even rarer. Individuals are almost never
audited in this way. On-site or "field audits" are used
mainly for larger businesses, particularly when records are
not portable. If you do get a notice of a field audit,
professional help is definitely recommended.
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