What to Do If You’ve Been Audited by the IRS
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The start of a new year is often a time for fresh beginnings, but for some, it can also bring the unsettling news of an IRS audit. While receiving an audit notice can feel overwhelming, it's important to remember that an audit doesn’t necessarily mean you’ve done something wrong. The IRS audits returns to ensure that taxpayers are paying the correct amount of taxes, and having a clear plan for how to respond can make the process smoother and less stressful.
What Does an IRS Audit Mean?
An IRS audit means that the agency is reviewing your tax return more closely. The audit may be triggered by discrepancies in the return, random selection, or a variety of other reasons. Here are the most common types of IRS audits:
Correspondence Audit
This is the least invasive type of audit and typically happens through the mail. The IRS will request additional documentation to support certain items on your return, such as deductions or credits.
How to Respond: Respond promptly by providing the requested information. These audits usually don’t require in-person meetings.
Office Audit
In an office audit, you will be asked to visit the IRS office to provide documentation for various items on your return.
How to Respond: Be prepared to bring your tax records, including receipts, financial statements, and other supporting documents.
Field Audit
A field audit is the most comprehensive and involves an IRS agent coming to your home or business to examine your records.
How to Respond: Ensure all of your records are organized and accurate. You may want to have a tax professional present to assist with the audit.
How to Prepare for an IRS Audit
Review Your Tax Return
Before the audit, take the time to review the tax return in question. Make sure all of the figures are correct, and gather the documentation supporting your deductions, credits, and income.
Gather Your Documents
The IRS will request documentation related to your return. This could include:
Bank statements, receipts, invoices, or canceled checks for deductions
Proof of income such as W-2s, 1099s, or business records
Any other relevant financial documentation
Stay Organized
An organized approach will help streamline the audit process. Keep your documents neat and easily accessible. You’ll be in a better position to respond quickly if the IRS asks for additional information.
Consider Professional Help
While you can represent yourself during an audit, having a tax professional or tax attorney on your side can help. They can ensure that your rights are protected and assist with gathering and presenting the necessary documentation.
What Happens During the Audit?
Review of Records: The IRS agent will review your records and may ask questions to clarify certain items on your return.
Determining Liability: The agent will determine if the IRS’s initial assessment is correct or if adjustments should be made.
Resolution: At the end of the audit, the IRS may either accept your return as filed or propose adjustments, which could result in additional taxes owed or a refund.
How to Avoid IRS Audit Issues in the Future
Ensure Accuracy
Always double-check your tax return for accuracy before filing. Minor mistakes or inconsistencies can trigger an audit.
Keep Detailed Records
Proper documentation is key in the event of an audit. Keep detailed records for at least 3-5 years in case the IRS requests information.
Hire a Professional
Working with a tax professional ensures that your tax returns are prepared correctly and minimizes the risk of errors that could lead to an audit.
Example
As the clock strikes midnight on New Year’s Eve, Lisa, a freelance consultant in Austin, is celebrating with friends and family. But in the midst of the festivities, she receives an email with the subject line: "IRS Audit Notification." At first, she’s shocked—she had no idea why the IRS would want to audit her. After taking a deep breath, Lisa decides to take immediate action. She contacts her tax attorney the very next morning to discuss the audit. Her attorney explains that the IRS has flagged her business deductions for potential discrepancies. Together, they go over Lisa’s 2020 tax return and begin gathering all necessary documents, such as receipts for office supplies, bank statements, and records of client payments.
By January 10th, Lisa’s attorney has everything ready, and they submit the requested documentation to the IRS. As the weeks go by, Lisa receives a notification from her attorney that the audit has been resolved, and the IRS has accepted her original return without any changes. Lisa, relieved and grateful for the smooth process, enters the new year with confidence. The audit experience taught her the importance of keeping detailed records and consulting with professionals when needed.
Receiving an IRS audit notice may seem daunting, but with the right preparation and professional assistance, you can handle it with confidence. At Huenefeld Law, PLLC, we specialize in guiding Texans through the audit process, ensuring that their rights are
About Huenefeld Law, PLLC
Huenefeld Law, PLLC is a Texas law firm based in Longview, Texas, dedicated to helping individuals and businesses with their legal needs. We specialize in estate planning, business planning, asset protection, elder law, tax litigation, and business formation services.
Whether you prefer in-person consultations or the convenience of online meetings, we tailor our services to fit your busy schedule. Ready to plan for the future or protect your assets? Contact us today to schedule your free consultation and let us help you navigate your legal journey with confidence.
