Tax Hotline can assist you in dealing with IRS Audits
Important things to know about audits.
1. You do not need to be present at the audit. You can have an attorney, CPA, or EA (Enrolled Agent) represent you
2. If you are by yourself at the audit and things get confusing, you can ask the audit to be suspended until you can speak to a tax professional. The IRS must stop asking questions and adjourn the meeting so you can seek advice.
3. The burden of proof is on you in a tax audit. However, if you end up going to a tax court, the burden of proof shifts to the IRS, as long as you meet the IRS's substantiation and record-keeping requirements and present credible evidence.
4. Financial status audits, once commonly used by the IRS, can no longer be used, unless a routine examination reveals the likelihood of unreported income.
5. It is IRS policy not to examine an individual's tax return if the taxpayer has been audited for the same issue(s) in either of the two preceding years and the audit resulted in no tax change. The exceptions to this policy are tax returns with Schedule C (Profit or Loss from Business) and Schedule F (Profit or Loss from Farming).
Types of audits.
1. Office audits - They are held at one of the IRS's office. A notice is sent to you indicating the date of the audit and a list of items the IRS wants to examine. If the time to get ready for the audit is insufficient, you can request a postponement. This type of an audit usually is concerned with itemized deductions such as medical expenses, charitable contributions, tax and interest expense deductions, employee business deductions and other miscellaneous deductions.
2. Field audits - They are held at the taxpayer's place of business. They focus on business returns covering items at the discretion of the field auditor. Travel and entertainment, auto expenses, payments to independent contractors are favorite topics.
3. Correspondence audits - They are conducted completely by mail, and limited to a few specific items of an individual return. They can include a list of questions or request of substantiating documents to be mailed back to the IRS in an enclosed return envelope.
Tips to get ready for an audit
1. Don't wait until the night before of the audit to get your materials together.
2. Organize your documents and receipts in folders.
3. Don't bring documentation for parts of your return that aren't being audited.
4. Don't ignore your audit request letter.
Tips during the audit
1. Treat the auditor as a professional.
2. Don't talk about areas of your return not being audited.
3. If you disagree, just state your case without arguing.
4. Don't feel intimidated.
5. If you are completely dissatisfied with the results, consider appealing your case. Statute of limitations on audits the IRS must make an assessment regarding an individual tax return within three years of the due date of the tax return or the date the return was filed, whichever is later. If more then 25 percent of the income required to be reported is omitted from the return, the statue of limitations extends to six years. No statue of limitation runs on a false or fraudulent return.