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What Should You Do If You Receive an Audit Notice?

March 20, 2023

Receiving an audit notice from the IRS or state taxing authority is stressful, even if it is only alerting you of a minor issue. When you file a tax return, you represent to the government that the information is correct. However, the government has the right to investigate your supporting documentation and underlying facts if they identify problems or deficiencies in your filing to determine whether you paid sufficient taxes. In an audit, you have the burden of proof to demonstrate you paid your taxes correctly. As a result, it is important to treat an IRS audit notice seriously and take time to get professional legal and tax advice so you don’t risk making matters worse. If you receive an audit notice, the best way to respond is to take these steps.

Review All Tax Notices from the IRS or State Government Carefully

There are different types of letters sent by the IRS, including ones notifying you of penalties, collection action, non-filing, or audits. As soon as you receive a letter, you should read it to determine what response is being requested and the deadline. You will need this information when you contact a tax lawyer for assistance. It is crucial that you do not ignore a notice or delay your response. There are strict deadlines and you risk the government taking action against you and/or waiving important defenses and responses if you don’t respond in a timely manner.

Determine the Reason for the Audit and the Type of Audit 

If you are being audited, the notice will request information about a specific tax return or returns you filed. The notice will also typically include a phone number to contact for additional questions. However, it is unlikely that you will be given the name of a specific person assigned to your file.

Generally, the audit letter will indicate the type of audit. If the letter requests follow-up by mail, it is likely that you have been selected for a correspondence audit. This is the most common type of audit where information is exchanged via mail rather than in person. A correspondence audit is potentially the least risky kind of audit as the scope of the audit is more limited than other audits. 

If the letter offers a date for an appointment, you are facing an in-person audit. The notice will generally include an open inquiry for a particular year and ask that you provide all income and expense documents. Any time you are facing an in-person audit, it is a good idea to contact an experienced tax attorney before speaking with anyone from the IRS to ensure that you are adequately prepared. 

In both types of audits, it is essential to comply with all deadlines. 

Consult with Your Accountant and Tax Attorney About the Audit

You want to assemble a team of professionals to help you prepare for the audit. Your accountant has an understanding of your finances and recordkeeping. Your tax attorney has the skills to advocate for you and your position. All of you should work together to respond to the audit.

Compile Documents Requested in the Audit

Once you have determined why you are being audited, you will need to gather any documents that have been requested to provide as soon as possible. It is advisable to be as complete in your disclosure as possible. Providing all information upfront and in a well-organized manner can save you time, and demonstrates that you are forthcoming and cooperative with the audit process.  

Don’t Delay Resolution of an Audit

It is usually to your benefit to resolve an audit as quickly as possible. That’s why it helps to have professional guidance.

Our tax attorneys regularly work with clients on all types of tax matters. We understand what information auditors want and how to address disputes and advocate for your interests. We can represent you throughout the audit process to challenge and/or negotiate your tax issues so you achieve the best result possible. If you have received an audit notice, contact us to learn how we can help you.

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