Important Message about COVID-19: The First lobbies are currently open with limited access. Please click here to read the full update.

How Do I Prepare for a Tax Audit? | The First National Bank Blog

March 24th, 2015

tax audit prepIt starts with a letter or a phone call. The IRS notifies you that you’re being audited. The first question you’re likely to ask is why your return was singled out. The answer is the IRS has a system for comparing each tax return against a set of norms or similarities found on a significant number of returns filed by other tax payers. If your return deviates too far from the norms, it may be reviewed for a tax audit.

Will the audit be face-to-face?

It depends. Some audits can be settled through the mail. Correspondence Audits, as they’re sometimes called, involve mailing the IRS more information regarding your income, expenses, deductions, etc. A face-to-face audit requires meeting with an auditor at the IRS offices or at your place of business. Often, the audit is held where the filer’s records are most easily accessed.

What should I bring?

The IRS will expect you to have receipts, records and other documentation to support all credits, deductions or exemptions you claimed on the return(s) being audited. Unless there are glaring errors or omissions, the IRS will not usually audit returns filed more than three years prior. If the errors are serious, audits can go back as far as six years.

Just in case: Keep records of assets for as long as you own the asset plus three years. Payroll records should usually be kept for six years.

Is the audit’s outcome final?

Not necessarily. Audits may be reviewed for errors by the auditor’s manager. If there are mistakes, the IRS will contact you regarding possible corrections and any changes in the amount you owe. It’s also important to remember that taxpayers have rights. Knowing them in advance might be the best way to survive an audit. As soon as you receive an audit notice, visit the IRS website for an overview of taxpayer rights.

Note: The information contained in this blog is not intended as a substitute for the advice of a qualified tax professional.

Do you have advice for getting through an IRS audit? Let us know in the Comments section.