By Ryan Velez
When the IRS sends you that letter saying they want to audit your tax return, it’s easy to get worried. Perhaps it’s a matter of your tax return not matching what you reported, or a few questions about your expenses. Kemberley Washington is a CPA and former IRS agent, and she has shared three main things you can do when the IRS pops up.
One thing that’s important is being prepared to push back. “You should first get an understanding of what items are being audited and review the examiner’s document request. This request will outline items needed to substantiate the amount claimed on the tax return. Remember, during a civil tax audit, the burden of proof is on you.
Gather documents to substantiate questionable items on the tax return. If you do not have any records, there is still hope! Remember, there are other methods of substantiating items on the tax return. For example, if you are a home health nurse and you previously claimed vehicle expenses, consider obtaining patient records for the appropriate taxable year and estimate mileage based on these visits. Examiners are allowed to accept various types of evidence to substantiate items, including third-party testimony, affidavits, and other types of verification,” said Washington.
However, you may need to bring in help as well. “If you are uncomfortable with the mere mention of the letters I-R-S, it may be a good idea to obtain an agent to work on your behalf. This may include a certified public accountant (CPA), an enrolled agent, or even a tax attorney. Once you inform the IRS examiner you wish to obtain representation and the IRS has received your completed Form 2848, Power of Attorney, the IRS must make all future contact with the representative only, thus alleviating you from speaking to the IRS.”
In addition, even if things are dire, there’s no reason to admit defeat. “If you are not in agreement with the examiner’s position, you do have rights. First, you should raise concerns with the examiner. Most often, the examiner will be willing to compromise on certain issues, if you are willing to sign an agreed report. However, if you are unable to come to an agreement with the examiner, you can request a meeting with the examiner’s manager or request that the case is heard by appeals.
Remember, the ultimate goal of both the examining group and appeals is to close the case without a subsequent trial. Therefore, if you stay persistent, chances are you will be able to obtain favorable results.”