Here’s How You Survive An IRS Audit

No matter the reason the IRS decides to come knocking, one thing is certain: You must be prepared.

Originally published Jan. 10, 2018

You receive the letter many dread: The Internal Revenue Service (IRS) has requested to audit your tax return. It could be for many different reasons. Maybe your income on your tax return did not match the amount reported to the IRS, or your expenses seem a bit questionable. If so, you could be the lucky winner of a full IRS audit. No matter why the IRS decides to come knocking, one thing is certain—you must be prepared.

As a former Internal Revenue Service agent, I have had the opportunity to participate in a host of audits, and time and time again the key to surviving the unwanted ordeal is to make certain you understand your rights and responsibilities.

Fight Back

You should first get an understanding of what items are being audited and review the examiner’s document request. That request will outline items needed to substantiate the amount claimed on your tax return. Remember, during a civil tax audit, the burden of proof is on you.

Gather documents to substantiate questionable items on your tax return. If you do not have any records, there is still hope! Remember, there are other methods of substantiating items on a tax return. For example, if you are a home health nurse and you previously claimed vehicle expenses, consider obtaining patient records for the appropriate taxable year and estimate mileage based on these visits. Examiners are allowed to accept various types of evidence to substantiate items, including third-party testimony, affidavits, and other types of verification.

Get Help

If you are uncomfortable with the mere mention of the letters I-R-S, it may be a good idea to get an agent to work on your behalf. It could be a certified public accountant (CPA), an enrolled agent, or even a tax attorney. Once you inform the IRS examiner that you seek to obtain representation and the IRS has received your completed Form 2848, Power of Attorney, the IRS must make all future contact with the representative only, alleviating you from having to speak to the IRS.

Do Not Settle for Defeat

If you are not in agreement with the examiner’s position, you do have rights. First, you should raise your concerns with the examiner. Most often, the examiner will be willing to compromise on certain issues, if you are willing to sign an agreed report. However, if you are unable to come to an agreement with the examiner, you can request a meeting with the examiner’s manager, or request that the case be heard by appeals.

Remember, the ultimate goal of both the examining group and appeals is to close the case without a subsequent trial. Therefore, if you stay persistent, chances are you will be able to obtain favorable results.