Newsletter 2015
Newsletter 2015
Audit Process
Audit Process
Print Full ArticleLast Reviewed: Jan 2016
Last Modified: Jan 2016
The initial correspondence you receive from IRS or ODR initiating a tax return examination will provide an extensive list of documentation for you to provide in order to prove the positions you have reported on your tax return(s). They are well within their rights to request this information and adjust or eliminate any unsubstantiated item on the tax return. We *highly* recommend you retain the services of a tax professional (us or someone like us) as soon as possible; the audit process is littered with procedures and jargon that even the most intelligent taxpayer cannot be expected to know. Furthermore, with a signed Power of Attorney form we can correspond, and even negotiate, directly with the revenue agent on your behalf.
As the audit proceeds, there is usually some back and forth communication with the examiner on issues they are concerned about. Even in the best circumstances, you should expect a full audit to last months. Eventually they will issue an examination letter that states the results of the audit and any adjustment to the tax liability. This letter will usually also include a rough calculation of any applicable penalties and interest. If you agree to the adjustments that are made (or simply wish to capitulate in order to end the ordeal), this will close the audit and the results will be forwarded to the accounts division where a bill or refund check will be issued.
If you cannot reach agreement with the examiner or their manager on a particular issue, the audit result (after closing) can be contested at the Appeals division within IRS. The appeals process involves responding to the auditor's assessment findings in writing to point out the item(s) you disagree with and why. Most appeals are handled by telephone, but you may request a conference at the nearest Appeals office. You might think the IRS Appeals division would be partial to the auditor's findings, but we have not found this to be true in any real sense; they review the strength of each case and have complete authority to adjust or negate any and all findings of the auditor. If you still disagree with the position IRS has taken on an issue after the Appeals stage, you have the option of going to Tax Court, or in some circumstances, to Federal District Court or an obscure court called the Court of Claims. If an appeal to one of these Courts is required, an outside attorney that specializes in tax litigation will need to be retained.
