IRS and State Audits

IRS audits are generally inititiated for one of four reasons.  The first is computer scoring.  The IRS computer program called the Discriminant Function System (DIF) scores returns aftr they are processed.  The program finds tax returns that are msot likely to contain an error.  The second reason a return may be seclected for audit is that third-party documentation may not match what was reported on the tax return.  This may be from non-matching W-2s or 1099s.  Returns are also selected to study the behavior of  similar taxpayers in a "market segmant" or question the treatment of an item on the return.  Tax returns are also audited if the IRS receives information from outside sources on noncompiance.

There are three types of IRS audits.

Audits by Mail usually occur when the IRS does not have all of the necessary information.  You may be missing a W-2 or some other documents.  They may want proof of expenses.  They will request that you mail them the missing information. 

IRS Audits in an IRS office are a bigger deal.  You meet with a tax examiner and answer questions he may have about your claimed deductions. The examiner may want to see the supporting documentation (receipts, bank statements, invoices for your business, etc).

When the IRS schedules an audit in your home or office, a revenue agent will come out and you need to be highly prepared.  A revenue agent has a good deal of training and will look for improper deductions and non-reported income.  You must have all of your documentation ready to show that you have complied with the tax laws.

Our enrolled agent can provide you with assistance and representation when you are faced with an audit. We will evaluate the notices you have received from the tax authority and explain them to you.  We will research any issues that are pertinent to your case.  We will then help you to assemble all of the documentation needed for the audit.

When we represent you, we become the primary contact with the tax authority so you do not have to deal with them directly.  We will request any needed documents, answer their questions and attend meetings with the examiner.  We will also help to negotiate and settle any issues they may bring up during the audit.  If necessary, we can also help you with the appeals process.