Tax Audit overview

An IRS audit is a review and examination of an organization's or individual's accounts and financial information to ensure that the information is reported correctly according to tax laws, and to verify that the reported amount of tax is correct.

An audit done in person is called a field audit. An audit done by mail is called a corr audit; corr audits are much more common.

Important things to know when faced with an audit:

  • Audit red flags: How to know if what you are doing will increase your chances of an audit – The IRS does not always give away their secrets. What we do know is that retunrs that show high deductions/low gross income, and returns that have international income may increase scrutiny.
  • What to do, and what not to do, if you are faced with an audit – Understanding how to deal with a Revenue Officer is one of the most important pieces of an audit puzzle. You need to be respectful and calm when dealing with them. On the other hand, understand that no matter how friendly they are towards you…they are not your friend. A smart Revenue Officer understands that if they are friendly, you are more likely to open up and share information with them; and anything you share can be used against you. Also, be super organized and make sure that all your t's are crossed and all of your i's are dotted; do not make them do any additional work when investigating your case. Lastly, don't lie. Ever.
  • Is there a way to negotiate with the IRS if you are being audited? – Absolutely.
  • Is there a risk of criminal prosecution? – Yes, but it is rare.
  • When can you represent yourself in an audit, and when should you hire outside representation? – It depends on your personality, and the severity of your case. You must know that when dealing with the IRS, you can't take anything personally. If you don't feel you can behave that way, get representation. An audit is not just about auditing numbers. It's about telling your story — to make you appear as sympathetic as possible.