What is the Process of an Audit?

Thousands of tax returns are audited annually by the IRS. Audits come in three forms: correspondence, face-to-face, and field. If you're subject to an audit, it doesn't mean that you've done something wrong. It is just to see if your tax return was prepared right.

The IRS examines each tax return filed. With the help of its program, Discriminate Function System (DIF), it compares deductions with averages. If your DIF score is higher than normal, you are more likely to be audited.

Conducted by mail, a corresnpondence audit will have the IRS requesting more information about certain items on your tax return. The IRS may ask you to submit documents to support your tax return, so quickly comply by mailing the documents through certified mail, but don't send the originals.

The IRS makes mistakes too, so if you are informed that you owe added taxes because of errors, compare the information on the notice with your tax return before you settle the additional tax. Make an appeal within 60 days if you disagree with the notice.

You will be asked to appear in the auditor's office (face-to-face audit) or you'll be visited by the auditor (field audit). By showing that the auditor's presence will interrupt business, you can stop him visiting you at work. The premises of the tax professional who submitted your tax returns is also an ideal place to perform the audit.

Professional tax preparers who do your tax returns, including CPAs, lawyers, or enrolled agents may attend the audit.

Don't disclose more information than required. Documents that were not initially required must not be presented and questions that do not pertain to the tax return being audited must not be answered. Divulging too much may cause the IRS to investigate you more, so provide straight answers and less explanations.

After audit, you will receive a copy of the auditor�s report. You can make an appeal to the auditor's supervisor on the spot if you disagree with the outcome. You can appeal to the IRS Appeals Division within thirty days if the supervisor doesn't agree with you. The Tax Court is your last stop if you still don't agree with the decision.

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