An Audit is an IRS investigation of you with requests for information. The IRS can request information from you without officially “auditing” you. This is called a “Math Error Adjustment” and the IRS uses Notices CP2000 and CP11 to request this information from you. (See also “Math Errors” in TaxHelp’s IRS NoticeView section). The IRS also has a procedure for denying taxpayers the “Earned Income Credit” and this is not an audit, either (although it could be a part of an audit).
So, an “audit” is an investigation of you. The IRS will pry into your life, business and property with questions to you, your family, associates, customers and acquaintances. You may be requested to respond to the IRS by letter, in their office, or in your office or home.
Thus, the 3 types of audits are called 1) “Letter Audit”, 2) “Office Audit”, and 3) “Field Audit”. Find out from the letter you received which type of audit you are having. Then, read the section below that applies to you.
Audit Notices:
Letter 566, Letter 2201A, Letter 2202, Letter 2205, Letter 2205A, or Letter 3572.
1. LETTER AUDIT
A Notice from the IRS requesting that information be sent to them by mail is called a “letter” audit. They usually use Form 566 and Form 886-A. Look carefully at the letter you received and determine which line of your return is in question. Then use the TaxHelp program to prepare your case. Send the documentation to the IRS by certified mail within the time periods requested by the IRS.
You must follow up with the IRS. Do not depend on them to timely respond to you. The IRS may send you a letter that they received your evidence and ask you for time to consider it. The IRS should send you a letter at some point that they have either accepted, or rejected your arguments or that they request further information. But, they may not. So, every month or so call the IRS at the number on the Notice and ask what the status is.
If the IRS doesn’t accept your evidence they will eventually send you a Statement of Income Tax Changes (Form 4549). This form is very confusing because the calculations work backwards against the items on the return. Look at the explanation pages to see what basis the IRS had for making their proposed determination. Decide if you agree with the IRS explanations and their calculations. If you do not agree you may use the TaxHelp Program to gather and send the IRS further information or legal analysis. If ultimately, you and the IRS do not agree then you will either have to petition Tax Court, Appeal the decision within the IRS or pay the amount owed and file a claim for refund before suing the USA in US District Court.
2. OFFICE AUDIT
A notice from the IRS asking you to call to set an appointment & come into their office with your evidence is called an “office” audit. Use the TaxHelp program to collect your evidence and prepare your case. They usually use Form 4564 to request information from you.
If you do not want to meet with the IRS face-to-face you can refuse, politely. The IRS can force you to come in by issuing you a Summons but this is rare. So, if you get a Summons, this is serious and you should have an attorney represent you.
If you decide to meet with the IRS agent, be polite and withdrawn. Have your evidence from the TaxHelp Program and be prepared. If, however, the IRS asks you anything that you don’t know or don’t feel comfortable about, tell him or her that you’re not prepared and that more research is necessary. Don’t sit around chatting with the IRS and do not joke around with them. Do not argue with your spouse, business partner or tax return preparer in front of the IRS.
If the IRS doesn’t accept some or all of your evidence they will eventually send you a Statement of Income Tax Changes (Form 4549). This form is very confusing because the calculations work backwards against the items on the return. Look at the explanation pages to see what basis the IRS had for making their proposed determination. Decide if you agree with the IRS explanations and their calculations. If you do not agree you may use the TaxHelp Program to gather and send the IRS further information or legal analysis. If ultimately, you and the IRS do not agree then you will either have to petition Tax Court, Appeal the decision within the IRS or pay the amount owed and file a claim for refund before suing the USA in US District Court.
3. FIELD AUDIT>
This is a more serious type of audit and you should consider getting an attorney to represent you. Sometimes the IRS makes unannounced visits to a home or business. In this case, do not let them into your home or business but get their identifying information and inform them that you need time to prepare your case and consult with a lawyer. Do not give them your telephone number and do not put it on your letters to the IRS. Make them do everything in writing. Also, consider whether you want to do a Freedom of Information Act Request.
You can resist or refuse a field audit. The IRS could issue you a Summons compelling compliance. If you initially resist a field audit you can agree to comply later. If you resist, send a letter to the IRS asking for the specific reasons why it is necessary for them to come to you.
The IRS will use Form 4564 to request information from you.
If you decide to allow the IRS to come to your home or business and you do not hire an attorney, you should consider recording the interview. Hurry the Auditor along and do not talk idly with him or her. Request a copy of the auditor’s notes. Do not give the IRS more information than they seek. Do not answer any questions that are not asked. Simply point to the evidence as you have provided it and state that any other evidence will be coming.
If at any time you do not want to continue the interview, tell the Auditor you wish to seek legal counsel and terminate the conversation.
The end of the interview is not the end of the Audit. Do not allow the Auditor to come to your home or Business again. From this point of time on, all contact with the IRS should be through letters. Make each letter very short and only include further evidence to support your claims.
If the IRS doesn’t accept your evidence they will eventually send you a Statement of Income Tax Changes (Form 4549). This form is very confusing because the calculations work backwards against the items on the return. Look at the explanation pages to see what basis the IRS had for making their proposed determination. Decide if you agree with the IRS explanations and their calculations. If you do not agree you may use the TaxHelp Program to gather and send the IRS further information or legal analysis. If ultimately, you and the IRS do not agree then you will either have to petition Tax Court, Appeal the decision within the IRS or pay the amount owed and file a claim for refund before suing the USA in US District Court.
