An IRS Audit Letter? Don’t Panic!

The letter none of us want to get has arrived in your mailbox – the IRS wants to audit your taxes! While this is not welcome news, there is no reason to panic. Often, there is nothing wrong with your taxes at all and the IRS has just picked you for a random audit based on a statistical model in a computer. Other audits are certainly triggered by the same computer due to something on a return that the artificial intelligence (AI) algorithm has picked up. This could still be no issue or just a minor issue that just hit a particular criteria in the AI. But there are times when actual items in your return will cause an audit. Things like reporting no income, more than $10 million in income or filing even home office deductions that seem high relative to your income.

What to Do

First, read the letter the IRS sent you. The letter will tell what the audit is about, what information you will need, if it will be an audit by mail or in-person, and provide a data by which to reply. Do not miss the date by which you must reply! The important thing to remember, above all else, is not to ignore dates and times in the correspondence.

Attend the Audit?

The first thing to do is get organized and gather all the information and data the IRS requested and that you used to fill out your return. If you used a tax professional they should also be notified and you should work with them to respond to the audit. The next question for you is whether you should attend the audit or not.

Your choices are to go to the audit yourself, go to the audit with your tax preparer or representative, or to let your representative meet with the IRS. It is usually recommended that you not attend the audit as people being audited are usually nervous. Idle chatter that might volunteer information is only helpful to the IRS, not you. Also, if you attend, there is the chance that you might be asked a question that catches you off guard. If you send an accountant or CPA, they will take notes and bring such questions back to you so you can respond in a prepared manner.

If you don’t have a tax professional that prepared your return to go with you to the audit, it is a good idea to hire an accountant or CPA to represent you. Hiring an accountant or CPA from CustomOne CFO & Controllers will provide you with the proper representation to analyze your return and answer any questions the IRS might have.

Things to Remember

Only take the requested information to the audit and, if you attend, only answer what is asked. Be honest, but don’t volunteer information. Make sure you only give copies of your documents to the IRS and keep a list of what you have given them. Make sure your accountant or CPA examines everything thoroughly before you sign anything and get copies of everything you sign.

Getting through an IRS audit can be difficult and could requires expertise you don’t have. In addition, being calm and rational can be difficult. By hiring an accountant or CPA from CustomOne CFO & Controllers, you will get the assistance you need to get through your audit quickly and cleanly.