How to Protect Yourself in a Tax Audit
- 1). Gather your existing records. The essential goal of an audit is to explain each item you claim on your tax return. Documents vary depending on the type of items you claim on your return, but in general should be the same items you use to prepare the original return, or the items you delivered to your tax return preparer that completed your return.
- 2). Obtain missing records. If you do not have copies of documents that support the items on the return under examination, track down the documents. Examples of documents include bank statements, canceled checks for expenses such as childcare and business receipts from vendors.
- 3). Match documents to the items on your return. Make notes that remind you of why the items you claim are reported on the return.
- 4). Determine the type of audit you must participate in. Some IRS audits are mail-in exams and others are in-person exams. A mail-in audit requires you to mail in documents to support your return, while in-person audits require you to meet with an IRS agent and produce your records. The correspondence you receive from the IRS that notifies you of the exam lists the type of audit used for your return.
- 5). Decide if you want representation. If you feel ill-equipped to answer questions regarding your return, call a licensed tax professional. If you paid for professional return preparation, contact the tax professional who prepared your return. Many preparers offer client representation if a return they prepared is examined. However, the preparer must be a licensed CPA, attorney or enrolled agent to represent you. You may also have an unlicensed family member or outside licensed tax professional represent you before the IRS.
- 6). Communicate with the examiner if required and adhere to deadlines. Failure to do this may result in adverse examination results.
- 7). Stick to the facts. Answer exam questions honestly, but do not offer additional information or explanations.
- 8). Understand the exam results. After the exam has concluded, make sure you understand how the result is calculated. If you owe additional tax, ask the examiner how the balance was calculated. If you disagree with the results, file an appeal. You may speak with an IRS agent in an appeals office separate from the examination division that reviews your case and your documents to determine if the exam results are correct.