Facing a Personal Income Tax Audit? Here’s Help

Income Tax Audit

Last updated on October 28th, 2020

The mere mention of the word “audit” can be deeply unsettling, even to the average law-abiding American taxpayer. This year, a poll from Rasmussen Reports found that 23% of Americans were worried the IRS would audit their taxes – the highest level of concern reported in over 10 years.

As unpleasant as audits seem, they are often simply routine analyses of randomly chosen taxpayers. You may not have done anything wrong to trigger the audit – and even if you have, you don’t need to panic. Here’s what to do when faced with a personal income tax audit.

Know the type of audit – and how to respond

The initial letter from the IRS will include instructions on how to proceed. The majority of audits are conducted through mail – and you’ll just have to submit paperwork to back up your return. When the issue requires more detail, you may have to do an in-office audit. Only the most in-depth investigations call for a field audit, in which you meet the agent at your home, place of business, or tax preparer’s office.

Clarify what the IRS needs from you

The IRS should specify what records they need in the letter. Some records you might be asked for include receipts, bills, bank deposits, or proof of expenses and deductions. Gather as much documentation as possible, but make sure it is relevant to the matters the IRS are questioning on your return.

Remain calm and professional

Maintaining your composure is critical. You may disagree with the auditor, but arguing won’t help. By the same token, don’t get too friendly. Even the most innocuous questions posed by an IRS agent might be designed to get you to reveal an error you inadvertently made.  Answer questions fully, but succinctly.

Keep the focus on this year’s return

You might be tempted to bring up a past tax return, when you had made the same deduction you’re now being audited for without incident. Instead, stay focused on the current situation. The last thing you want is to arouse the IRS’ suspicion further, which might prompt a more thorough inspection of your past returns.

Know there is help out there

With the pitfalls that can arise during an audit, your best bet may be to hire a tax professional or contact the IRS Taxpayer Advocate Service (TAS).  The “TAS” is an independent organization within the IRS and is your voice at the IRS.  They ensure the IRS follows the “Taxpayers Bill of Rights” which are 10 fundamental rights that every taxpayer has when interacting with the IRS: The Right to be informed, The Right to Quality Service, The Right to Pay No More than the Correct Amount of Tax, The Right to Challenge the IRS’s Position and Be Heard, The Right to Appeal an IRS Decision in an Independent Forum, The Right to Finality, The Right to Privacy, The Right to Confidentiality, The Right to Retain Representation and The Right to a Fair and Just Tax System.