What’s the Audit Process?
The IRS determines if your tax return was prepared right through a correspondence, face-to-face, or field audit.
Every tax return filed is examined through the Discriminate Function System or DIF that compares your deductions with averages. You are likely to be audited if your DIF score is more than average.
Conducted by mail, a corresnpondence audit will have the IRS asking for additional information about certain items on your tax return. The IRS may ask you to submit documentation to support your tax return, so promptly comply by mailing the documents through certified mail, but don’t send the originals to the IRS.
In case the notice states that you need to pay more taxes because of an error, compare the tax return with the information on the notice first before paying the amount required. The IRS can miscalculate what you need to pay or enter data incorrectly, too. If you disagree with the additional tax, you have to appeal in writing in 60 days.
You’ll be asked to appear in the auditor’s office (face-to-face audit) or you will be visited by the auditor (field audit). If you do not want the auditor in your office, show that his presence will be disruptive to business. The premises of the tax professional who submitted your tax returns is also an ideal place to perform the audit.
Professional tax preparers (enrolled agents, CPAs, and lawyers) who prepared your tax returns may attend the audit instead of you.
Unnecessary disclosure of information should be avoided. Documentation that were not initially required should not be presented and questions that are irrelevant to the tax return audited shouldn’t be answered. Divulging too much may cause the IRS to investigate you more, so give short answers and less explanations.
After the audit, you’ll receive a copy of the auditor�s report. You can appeal to the auditor’s supervisor on the spot if you do not agree with the outcome. You may appeal to the IRS Appeals Division in thirty days if the supervisor does not agree with you. If you’re still unhappy with the result, you may take the appeal to Tax Court.
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