How Does the IRS Let One Know About an Audit?

How Does the IRS Let One Know About an Audit?

The IRS conducts three kinds of audits, ranging from a simple request for information to a visit to your home from an IRS agent empowered to review your financial records. If your tax return has been selected for an audit, you will be notified either by mail or phone, depending on the kind of audit.

Types

    The simplest and most common audit is the correspondence audit; this take place when the IRS has a question about your return and needs you to send additional documentation by mail, such as receipts to prove deductions or information about a dependent. The second type is the office audit. These are triggered when the IRS finds something suspicious on your return, and you must bring your supporting documentation to an IRS office, in person, for an examination by an agent. The third, and most nerve-racking, is the field audit, in which an agent comes to your home or your place of business and looks around, in addition to reviewing your records.

Notification

    If the IRS has identified you for a correspondence audit, you will receive a letter notifying you of that fact and specifying what additional documentation the IRS requires. For an office audit, you will also be notified by mail. The letter will tell you what material you need to bring to the IRS office and will include instructions on setting up an appointment. If you've been chosen for a field audit, the IRS agent who will be conducting the audit will call you in person to notify you and set up a time for the audit to take place.

Reasons

    Do not expect your notification letter or phone call to reveal exactly why your return was selected for an audit. According to the IRS, common reasons for an audit include: mismatched information, in which the income you reported receiving does not match what your employer and others reported paying you; computer scoring, in which the data on your return resembles a pattern known to be used by tax cheats; related examinations, in which audits of other people or businesses lead agents to you; and possible participation in illegal tax-avoidance schemes. The information the IRS requests during the audit might give you a clue as to why you've been singled out -- but you won't know whether that problem triggered the audit or was identified only after your return was selected.

Rights

    For an office or field audit, you have the right to be represented by an accountant or a lawyer. That person can attend the audit with you, or can even go in your place as long as she has written authorization to make decisions on your behalf. You have the right to appeal any decisions made in the audit. These rights should be communicated to you when you are notified of the audit, but even if they aren't, you still have them.

Misconception

    At one time, the IRS selected tax returns at random for a top-to-bottom audit as part of an initiative called the Taxpayer Compliance Measurement Program, or TCMP. In these audits, taxpayers were required to prove every item in their return -- right down to their own names and Social Security numbers. TCMP audits were suspended indefinitely in the mid-1990s amid budget cuts at the IRS and general outcry over intrusive examinations of innocent people. Still, it's the TCMP "audit from hell" that many people think of when they are notified that they have been selected for an audit.



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