IRS Tax Disputes: What To Do If You’re Audited

Tax season is finally behind us – and if you are like many Americans, particularly business owners and high-income individuals, that means a big sigh of relief. Hopefully it also meant a sizeable refund check!

But now that the returns have been filed, there is another concern that often weighs heavily on the minds of taxpayers—the fear of being selected for an IRS audit.

And while it is true that facing an IRS audit can be stressful and time-consuming, there is no reason to panic. In fact, if you’re prepared and if you have “played by the rules”, an IRS audit can be quite painless. Below are three tips to help you prepare for an audit should you be selected to do so, courtesy of a recent article:

Know what to expect.

Envisioning a visit from a suit-clad IRS agent with a briefcase? That’s not usually how an audit plays out. The vast majority, or 76%, are correspondence audits, meaning the IRS requests information by mail instead of questioning a taxpayer in person.

These tend to focus on specific items on a return — like itemized deductions for medical expenses — and simply ask for documentation, said John Lieberman, CPA at Perelson Weiner LLP. In-person field audits are broader inquiries about a tax return and often involve verifying income, he said.

In either case, you’ll likely receive a notification by mail explaining which parts of your return the IRS has questions about.

Don’t ignore the letter.

Shoving the letter you get from the IRS in a drawer and pretending it’s not there won’t make it go away. You’re usually given 30 days to respond, so make sure to write back promptly or certain items may be disallowed or automatically corrected. The IRS will then begin collecting on any extra tax it believes you owe.

Get documentation together.

Once you find out what parts of your tax return are in question, you should start collecting any relevant paperwork.  The rule of thumb is to keep tax-related documents for three years from the date a return was filed. If you can’t find the documentation you need in your files, you can usually get another copy elsewhere. If you’re missing the bill for a medical expense you claimed, for example, you can contact your doctor’s office. If you donated money to a charity but lost your receipt, the charity will probably be able to send you a duplicate.

As you can see, the name of the game when it comes to managing an IRS audit really is documentation. If you’ve kept careful records, you usually have nothing to worry about. But even if your record keeping is less than perfect, don’t panic. In many cases, it is relatively easily to track down the necessary paperwork. The key is to be prepared, and most importantly, not to simply ignore the process. Many taxpayers become almost “paralyzed” with fear and simply ignore correspondence from the IRS. This is never the right approach. If you’re facing an IRS audit (or any other tax dispute), we would be glad to help you resolve it. Please contact us today!

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