By mariocdep70178659, Nov 3 2014 07:43PM
In my experience of representing clients that have been auditied by the Internal Revenue Service (IRS),
I can tell you that it's an adventure every time. Although the parameters of an audit are common, no two audits are the same. Here are some tips to prepare a client before and during the audit examination.
Before the IRS Examination:
* If you prepared the tax return yourself and yor are not sure what the IRS is requesting for you to provide, or if you need help explaining how you prepared your tax return, seek representation. You have the oppurtunity to represent yourself, however, you leave yourself at risk in having prior tax returns to be audited as well, and paying more taxes and penalities. A qualified representative such as a CPA,
Enrolled Agent, or an Attorney should be able to limit the scope of the audit.
* Items that the IRS will examine are bank statements, book ledgers, investment statements, receipts of expenses, and any necessary affidavits. Be sure that these items are available and ledgeable for the auditor to examine.
* The documentation that is provided must substaniate all reportable income, and any ordinary & neccesary expenses that is used to offset that income. There are times when the IRS will allow
expenses to be deducted from income, even though a receipt is not available.
During the IRS Examination:
* Be on time and dress appropriately. IRS auditors have full schedules; they don't want to wait for a client to show up late.
* Be honest!! "Numbers don't lie," an IRS agent will be able to determine the accuracy of the tax return on their own. An IRS agent will find lying to be insulting.
* Answer their question and only their question. Only provide a yes or no answer, unless asked to provide more detail.
*Listen to your representative, a good representative will know what direction the IRS auditor is leaning, and can try to negotiate a settlement, if one is needed.
No one likes to be audited; the process can be long and emotionally draining. The outcome of the audit
will depend on how well you keep your financial records intact. Hopefully these suggestions can make
the examination go quickly, and pain free. If this helps, I have had audits where the client's have money,
refunded back to them.
Mario C. DePasquale, EA