Audited by the IRS: What to Do Next

Feb 13, 2020

I'm Being Audited by the IRS. What Should I Do?

You’re being audited by the IRS. Now what?

First, don’t panic. If you got a letter from the IRS, are freaking out, and need to speak with someone, get in touch with our experienced tax lawyers. We’ll guide you through the process and get you safely to the other side.

Why Am I Being Audited by the IRS?

The most common reasons for an IRS audit are:

  • Inconsistencies: You’re not the only one reporting the information on your W-2s, 1099s, and cash wages. Your employer also files this information with the IRS. If the information you filed doesn’t match your employer’s records, you could be a target for an IRS audit.
  • High deductions: If you’re claiming an unusual number of deductions compared to others in your tax bracket, or deductions that are inconsistent with previous years’ earnings, that can draw attention from the IRS.
  • Not filing: If you failed to file one or more tax returns, the IRS can audit you at any time in the future.
  • Audit by association: If you’re entangled with another individual or business that’s been audited, the IRS may audit you as well.
  • None at all: Some IRS tax audits are conducted based on random selection.

Primarily, during an audit, the IRS looks into the federal tax returns you filed. If the review shows that you filed a sound tax return, the IRS won’t dig further. However, if agents find errors, whether innocent or purposeful, you may incur interest, penalties, and fines.

What Should I Do If I’m Being Audited?

If you’re being audited by the IRS, you’ll have to prove that the information on your tax returns is correct.

  1. Gather Records: You will need to gather your records, such as W-2s and bank statements, in order to prove the information on your federal tax returns under examination. If necessary documents are missing, request duplicates; tax auditors won’t accept excuses for missing or lost records.
  2. Send Documentation: Depending on the type of audit, you may have to send in copies of your documents or speak to an IRS examiner in person. We strongly recommend hiring a tax lawyer before speaking to an IRS examiner. (See more details below.)
  3. Provide Testimony: If need be, your verbal testimony, provided directly or through tax counsel, will be essential to explain and support the information supplied to the IRS on your federal tax returns.

Feeling lost? Our experienced tax lawyers can guide you through this process. Give us a call at 847-906-2365.

Types of IRS Tax Audits

There are different types of tax audits, each with specific requirements.

  • A correspondence audit requires you to mail checks, receipts, and other documents verifying the information on your tax return to an IRS service center. You will work with an IRS auditor via mail and/or fax, and will be expected to support your federal tax returns via written statements and explanations of the items under examination.
  • Local audits are conducted by local IRS outposts. You will be requested to come into a local IRS office and participate in a face-to-face interview with an IRS examiner.
  • Field audits take place in your home or place of business. Like local audits, they require a face-to-face interview.
  • The Taxpayer Compliance Measurement Program (TCMP) is the most complicated type of tax audit. Rather than audits based upon suspicion of fraud, these audits are more like a routine checkup for the IRS. Under a TCMP audit, potentially all of the information on your tax return is subject to examination, regardless of whether it looks suspicious or not. For this type of audit, you may need to provide documents such as birth and marriage certificates.

Will the IRS Send Me to Jail?

Being audited does not automatically mean you’re being punished by the law. An audit is simply conducted to verify the information you reported to the IRS.

  • If the tax returns in question are correct, and you can prove it, you have nothing to worry about.
  • You may have unknowingly filed incorrect information on your tax returns. In this case, you can expect a bill from the IRS for the amount due.
  • If you don’t have the proper documents and receipts to prove that your tax return was correct, we can assist in reconstructing this data in order to defend you under examination.
  • If you knowingly filed a false tax return and are concerned about the IRS opening a criminal investigation, we strongly recommend you seek the counsel of an experienced tax audit attorney to guide you through the sea of treacherous waters an IRS examination can instigate.

How Much Will an IRS Audit Cost Me?

The cost of an audit depends on the type of audit, the amount of records available, and the number of years in question. A typical examination can usually cost around $5,000.

If you are unsatisfied with the initial audit result, you can appeal the decision and seek a secondary review through the IRS’ Office of Appeals. You may also be able to appear in tax court.

At the end of the day, if you owe the IRS money, you have options. While the IRS would love for you to pay them all out once, they understand that many taxpayers do not have the funds immediately available.

The IRS offers repayment plans so you can repay your debt over time. You may also qualify for an Offer-in-Compromise, which is essentially the IRS’ settlement program. If you do, you may be able to pay the IRS less money than you owe. Contact our attorneys at 847-906-2365 to see which option is right for you.

IRS Audit Help: Will Hiring a Tax Lawyer Make Me Look Guilty?

Not at all! Although the IRS audit process may seem daunting, this is what we do every day. We’ve helped countless people just like you get favorable results. We may even be able to help you settle with the IRS to pay less than you actually owe.

Getting help from a professional who knows the ins and outs of the audit process can only benefit you. Give us a call at 847-906-2365 to schedule a free consultation and learn what we can do for you.

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