How to Prepare for an Audit with the IRS

Henry Daniel Lively

Written by

Tax Lawyer - Newport Beach, CA

Contributor Level 20

Posted about 5 years ago. 44 helpful votes



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.


Call the Agent

Call the agent indicated on the notice to inform them that the information is coming and they should be expecting it. If you are unable to meet the deadline, give the agent a call and discuss it with them. Let them know your hardship in providing the data, what you are doing to get it, and how long it will take. The agent should give you extra time if you have a legitimate and reasonable problem.


Office Visit v. Service Center Audit

If you received a Service Center Audit Notice (only requires you to mail in data), then you are done for now and will receive notice back in a few weeks from the IRS regarding their determination or whether they require additional information. If they require additional information, go back to step 1 and provide this information in the same manner in which you originally provided the first information. If you do not agree with the results, call the Agent on the notice and discuss it with them to see if you can resolve your differences. If you can't reach a resolution, ask to talk with their supervisor. If you still are not satisfied, you can Appeal. At this point you will probably need to hire a professional. If you have an office audit, or even a field audit, keep a copy of the information you sent to the auditor, and be prepared to present it to them when you meet. They will want to interview you first to get some background information. This is normal.


Conclusion of Office of Field Audit

At the conclusion of the office of field audit the auditor will write a report to indicate the changes they are proposing, or request additional information. If additional information is requested, go back to step 1 and provide the information in the same manner. An additional face to face meeting may or may not be required. If you receive a report that you do not agree with, you should discuss this with the auditor. If you are still in disagreement, ask for a meeting with their manager or supervisor. If this does not satisfy you, you can Appeal. It is now time to get a professional on your side. In fact, if at any point in the process you feel uncomfortable, or get in over your head, seek the help of a tax professional.

Additional Resources

WWW.IRS.GOV WWW.LivelyLawGroup.Com

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