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Your 5 Step Guide to Surviving an IRS Audit

Mark Steber Chief Tax Officer Published On July 18, 2019

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If you’ve received a notice from the IRS about a tax audit, you’re probably feeling a bit dizzy right now. First, don’t panic – most audits are done by mail, and there are some immediate steps you can take to improve your situation. Instead, do get organized. You can ace this audit if you do the following five things.

Why am I being audited?

An audit is an official review of your tax return to verify income, credits, and deductions. These inquiries can range from a mail audit – a request to send documents clarifying specific line items – to an office or field audit, an interview with the IRS at their office or your home or business. The IRS selects taxpayers through a random process, as well as intentionally, based on the information provided. Taxpayers with complicated returns and higher incomes may stand a greater chance of being audited.

What should I do first in an audit?

  1. Acknowledge the IRS notice immediately. You don’t want to keep the IRS waiting. Plus, the sooner you respond, the sooner you can get your audit resolved.
  2. Gather supporting documents and verify that they match your return. A typo or miscalculation could have triggered the audit.
  3. Review your tax return to make sure everything is included and correct – we mean double, triple and quadruple check! If you can, look it over with your spouse or someone you trust – two pairs of eyes are better than one.
  4. Follow up with any requests for information by the stated deadline. If you don’t, the IRS will assess additional taxes based on what they think you owe without your input or defense. For office or field audits, make sure your documents are organized and that you are prepared to answer questions and defend your tax return.
  5. Consult a tax professional if you have questions or need help with the audit process. Having the guidance of a skilled specialist can ease your anxiety and help you proceed with confidence.

Do I have rights in an audit?

Be truthful when providing information to the IRS – it’s a crime to lie to a federal agent. If you don’t agree with the penalties and taxes assessed by the auditor, ask to present your case to the audit manager. They may agree with your defense, saving you time and money. If they don’t, you can file an appeal with the IRS Office of Appeals for further review.

If you end up owing money, pay it as soon as you can. This will help minimize penalties or interest which continue to accrue until the full tax bill is paid. If you are unable to pay your tax bill in full right away, the IRS does offer Installment Agreements. However, the IRS Installment Agreement has a fee, charges interest based on the Treasury rate, and continues to assess penalties and interest on the unpaid balance until the total is paid in full.

If you are facing an IRS tax audit, remember: Don’t panic. Just get organized and be prepared to present your case truthfully and confidently.

 

 

About the Author

Mark Steber is Chief Tax Officer, responsible for key initiatives that support overall tax service delivery and quality assurance. Mark also serves as a Jackson Hewitt liaison with the Internal Revenue Service, states, and other government authorities. With almost 30 years of tax experience and deep knowledge of the federal and state tax codes, Mark is widely referenced as an expert on consumer income tax issues, especially electronic-tax and data-protection issues.