With less than week left in 2017, it’s time to take stock of tax busy season and prepare for the possibilities. And that possibility is the audit. So, here’s a Q&A to break down what you can do (or if you’re the tax preparer, how to help your client) in the event of an IRS audit.
Question: My wife and I have been notified by the IRS that it has selected our returns for audit. This will be our first audit, and we’re apprehensive. What should we expect?
Answer: Usually, IRS audits are uneventful. Auditors ask taxpayers to produce receipts, canceled checks, and similar documentation to verify deductions and other facts and figures. When taxpayers come up with the required substantiation, examiners move on to other audits.
In fact, the feds frequently close cases without exacting extra taxes. And in many others they even authorize refunds.
Be concerned when an IRS investigator walks in unannounced at your home or office and asks to see your records. Odds are that a surprise audit means the agency suspects you filed a return that’s fraudulent.
So should you be targeted for what looks like an out-of-the-ordinary audit, make sure to find out the official designation of the person with whom you’re suddenly chatting. Is the Sherlock a revenue agent with the Examination Division or a special agent with the Criminal Investigation Division?
The difference isn’t academic.
About Julian Block
Attorney and author Julian Block is frequently quoted in the New York Times, Wall Street Journal, and the Washington Post. He has been cited as “a leading tax professional” (New York Times), an “accomplished writer on taxes” (Wall Street Journal), and “an authority on tax planning” (Financial Planning magazine). More information about his books can be found at julianblocktaxexpert.com.