How to Prepare for an Audit with the IRS

You have received a notice from the IRS that you are being audited. Now what? This guide will take you through the steps necessary to successfully navigate your way through an IRS audit.

Don't Panic

Read the letter you received from the IRS carefully. Does it require you to visit with the IRS on a date specific, or does it just require you to provide information? An office audit can lead to an expanded audit, but a request for information usually does not. Determine whether the IRS gave you sufficient time to respond to their request. If they did not, call them immediately and ask for an extension of time. This is usually granted so long as you are being reasonable.

Start a File

Start a file by maintaining everything regarding the audit in date order. First make a copy of the notice you received. This should be your first document in the file. Next make a copy of the tax return that the IRS is auditing and put it behind the letter. Also, make a copy of your tax return for the year before and the year after the year that is being audited.

Determine whether you will need professionnal assistance.

Make sure that you understand what the IRS is asking for, and that you can competently present the information to them. If you don't think you can, or do not want to talk to the IRS yourself, seek the assistance of a qualified tax professional. It is usually better to pick someone other than the professional that prepared the return. This could be a conflict with you.

Start gathering the information requested

Go step by step through the notice. Use it as a check list to provide the information that the IRS is requesting. You will need to do this whether you hire a professional or not. Put this information into your file behind the tax returns in the same order that it is requested in the notice.

Present information

Now you are ready to present the information to the IRS, or your tax professional for presentation to the IRS. If you are presenting the information yourself. Prepare a cover letter for the IRS indicating that you are responding to their notice, attach a copy of the notice, and indicate what information is enclosed. If anything is missing, indicate the missing information and what you are doing to provide this information. If you do not have the information anymore and cannot get it. Let the IRS know. If you hired a tax professional, they can assist you to provide alternate information or explain the situation to the IRS. The attached information should be clear copies, and as organized as possible. Provide summary sheets and tabs where possible. The easier you make it for the the IRS to understand and review your information, the quicker you will get through this process. Make sure you send the information to the IRS by certified mail, return receipt requested.

Additional Resources

WWW.IRS.GOV WWW.LivelyLawGroup.Com

Comments - add comment

Posted 28 days ago.

jwade's Comment: I was reviewing a friend's Avvo profile and I noticed this posting and as a CPA who deals with IRS representation cases I thought I would add my two cents. In almost every case, it is a bad idea to represent yourself even if you think you are saving money. In my experience, clients have a tendency to say things to the IRS agent that gets them into trouble (i.e. lost deductions, more areas open to audit, or in some very rare cases a referral to the Criminal Tax Division). A good tax attorney can explain your rights and the audit process and help you prepare for the audit (and appeals if necessary). They will also meet with the IRS agent to provide them with the requested information and answer any questions they might have (acting as a buffer between you and the IRS).