In an audit, the IRS will contact the taxpayer and request certain information. Usually such information is to verify the amounts of income stated by the taxpayer or to prove specific deductions stated by the taxpayer.

IRS auditors are educated and trained to ask specific questions during the audit, which will probe into the taxpayers overall situation.

Further, the auditor can request to review previous year tax returns and documentation or later year tax returns and documentation from the initial period the auditor is reviewing and auditing.

Audits can be selected by the IRS at random or based off of certain figures stated on a taxpayer’s return that may raise a red flag to the IRS. Believe it or not, most auditors are friendly and well educated with the tax code. Such auditors are simply doing their job to make sure all income was claimed and all deductions as stated are legitimate. If you have understated income or cannot verify certain expenses, the auditor may make adjustments and charge you with additional tax, and penalty & interest.

What triggers an audit? It can be hard to say what exactly triggers an audit or acts as a red flag, but usually we see that the IRS will audit a return if certain itemized deductions or expenses appear to be unreasonable, or are quite high in relation to the other figures on a tax return.

There are different types of audits. You can have a face to face or an in house audit, or you may have received a CP 2000, which is a notice of deficiency. The Notice of Deficiency is generated when the IRS has received information such as income that was not reported on the taxpayer’s return.

The IRS will generate a letter stating how your tax return differed and the overall ramifications to the taxpayer’s liability for that period. You can agree with the deficiency and pay whatever tax may be due, or of course, provide additional information to the IRS in regards to the specific situation.

We always recommend that a taxpayer who is being audited or has received a notice regarding a change to their tax return contact a tax professional.

After such taxpayer has discussed the ongoing issues with such tax professional they may determine that they do not need actual representation regarding the matter, or they may decide it would be best to be represented before the IRS.

If you are being audited, or have received a notice from the IRS that you do not understand, please contact us. We recommend that you take advantage of our free consultation and at such time you can determine whether or not you would like additional help with your issue.

-John McGuire