I'm being audited by the IRS-Now what?
How does the IRS decide who gets audited? The IRS uses a
recently updated formula and scoring system to evaluate tax
returns. If something seems out of whack- -like low income
accompanied by extremely generous charitable contributions--the
return is flagged for a more in-depth look. Simple math errors
do not warrant audits. What does warrant an audit are things
like taxpayers forgetting to report a source of income or
getting paid as independent contractors and forgetting to pay
your Social Security tax. There are two basic types of audits.
The most common are by correspondence. The IRS may request
further documentation by mail. You should send copies only and
always keep original records in your files for at least three
years, the amount of time the IRS can go back and audit a
return. Keep in mind, the IRS may go back indefinitely if they
The second type of audit is face-to-face. These occur when the
amount of documentation requested by the IRS might be too large
to handle by mail. In these cases the taxpayer must visit a
local IRS office on a specific date.
AUDIT ADVICE--1) Act promptly. The longer you wait to respond to
an audit the more you can pay in interest and fines. 2) If you
have a conflict with the date or need more time to get records
in order, call and reschedule the meeting. 3) Be friendly when
dealing with IRS agents. They might have leeway when it comes to
accepting partial records and documentation. Being cordial can't
hurt. 4) Be honest. On the other hand, don't volunteer any
information that isn't asked for. 5) Carefully choose your tax
preparer. Be sure he or she would be able to help you with an
audit. And remember, if you sign a return you are taking
responsiblity for that return. Blaming your accountant or
brother-in-law won't help during the audit.