The Internal Revenue Service defines an audit as “a review/examination of an organization’s or individual’s accounts and financial information to ensure information is being reported correctly, according to the tax laws, to verify the amount of tax reported is substantially correct.”
The idea of being audited by the IRS can make anyone nervous. Luckily, the chances of being audited by the IRS are relatively small. In 2015 only 0.84% of all individual tax returns were audited. If you do happen to receive a notice that you are being audited, it can be a frightening and overwhelming experience.
10 Things to Know if you Are Being Audited by the IRS
Here are ten things you should know about the audit process:
- The IRS only notifies taxpayers of an audit by mail or by telephone, not by email. If you receive an email saying you are being audited, it is a scam – do not respond to emails with any personal information.
- Receiving an audit notice does not necessarily mean that you have an error in your tax returns or that the IRS thinks you intentionally attempted to cheat on your taxes. The IRS randomly selects some returns to audit.
- You have the right to representation. You can represent yourself or hire an experienced tax attorney or a registered agent.
- The audit is only the first step in the process. Most complicated issues do not get resolved at the audit level.
- The IRS can summons your bank records if there is an open audit or you owe money to the IRS. You will receive a notice after the IRS has issued the summons to your bank. If there is a risk that bank funds will be transferred outside the U.S., you may not receive a notice of the summons.
- You only need to give the IRS the information they ask for and to answer the questions they ask. Under the pressure of an audit, people tend to talk too much or give additional information that may raise more questions. An experienced tax attorney can help ensure that you are responsive without giving unnecessary information.
- IRS Revenue Agents have limited ability to resolve complicated tax issues during an audit.
- Only the IRS Appeals Office or Chief Counsel’s Office have authority to compromise on issues that are not black and white.
- Most complicated tax issues are resolved in IRS Appeals or in Tax Court.
- Don’t ignore the audit notice! The IRS is not going to forget about it. If it is determined that you made a mistake on your taxes and owe money to the IRS, interest and penalties will be accruing. The longer you ignore the audit notice the more money you may have to pay the IRS.
If you are facing an IRS audit, McMahon & Associates‘ tax attorneys and enrolled agents can help. With over 75 years of collective experience working in the upper levels of the IRS, McMahon & Associates senior tax professionals know the IRS inside and out. Call 617-600-5400 or email us today.