Tax audits can be an incredibly frightening and stressful event for taxpayers. Receiving an IRS audit letter can feel very invasive because it requires you to provide years of detailed information about your business, personal life, and financial situation. Any small mistake you make can be found and punished.

Ultimately, the IRS has a wide variety of resources to audit individuals and businesses and that means that they often find errors. So, while a tax audit does not necessarily mean you have done anything wrong, it is still important to be prepared to defend yourself.

What Are IRS Tax Audits?

Believe it or not, even if you file your tax returns properly, the IRS might still decide to conduct an audit. An audit is just an attempt by the IRS to check whether you made any errors on your taxes and review your tax return. The purpose of the audit is to determine if you have properly reported all income and expenses to the federal government.
In some cases, tax audits are random. But in other situations, the IRS may decide to audit your return because they believe there may be suspicious activity.

Why is the IRS Auditing Me?

The IRS conducts tax audits for two reasons:

• They want to ensure that people who claim certain deductions actually qualify for them; and

• They want to make sure that people have reported all their income.

While it seems that the IRS audits at random, only a small portion of audits are a result of random screening in the IRS National Research Program. There are some common activities that may put you or your business on the IRS’s radar, including:

• Your failure to file a federal tax return or a delay in filing your return;

• Your failure to report some or all of your income;

• Math errors and mistakes on your returns;

• Deducting too many personal or business expenses;

• Earning a high income of over $200,000;

• Taking an early payout from your 401(k) or Roth IRA retirement accounts;

• Making false claims for tax credits or exclusions;

• Engaging in virtual currency trading;

• Reporting inaccurate figures as compared to other records that the IRS has on file;

How Do IRS Tax Audits Work? What Is the Process for IRS Tax Audits?

If your tax return has been selected for an audit, the IRS will first notify you by mail. This IRS letter will include all of the instructions on how the process works and information that they require from you.

After receiving this letter, your audit will take place either by mail or through an in-person interview with an IRS agent. If your audit is done through the mail, you will be asked to provide additional information, such as proof of income, expenses, and itemized deductions.

If you are required to participate through an in-person interview, the IRS will review your records either at an IRS office, at your home or place of business, or at your accountant’s office.

We often find that IRS agents are not as familiar with the tax law as you would expect them to be. Therefore, it’s important that you are not only providing them information, but you are providing the legal guidance to show why your tax position is correct so they can more easily agree with you, saving you time and money.

If you are not able to resolve your IRS audit with an IRS agent, then you may need to go to IRS appeals. Before working with appeals, it’s important to have your information and tax position completely prepared and organized. Appeals will review the position taken by the IRS agent and review additional information that you provide to decide whether any adjustments should be made.

How an Experienced Tax Lawyer Can Help with Audit Representation

Taxes can be confusing, but they don’t have to be. The best way to navigate your taxes is to hire a tax lawyer who has experience in dealing with IRS issues and can help you understand how it all works.

At JD Tax Law, we are a full-service tax law firm with a proven track record of success. We represent individual and business taxpayers in all aspects of the IRS auditing process, including appeals and Tax Court. Our team has over 15 years of experience dealing with the IRS, and we have successfully resolved countless tax issues and provided relief for hundreds of clients.

To get a tax resolution plan that is tailored to your specific tax situation, please contact us for a free, no-obligation consultation.

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