It’s unlikely that you’ll be audited — the
Make sure you’re actually being audited
People sometimes confuse an IRS adjustment notice with one for an audit, says Seattle-based CPA Robert Loe. (You can look up the types of notices here.) Adjustment notices come, for example, when the IRS finds a math error or discrepancy between your tax return and its records, and may offer instructions and information about changes to your tax bill.
“That’s not an audit,” Loe notes.
Also, legitimate audit notices come from the IRS only in writing — not via phone, email or social media.
“If that’s the first point of contact, you can pretty much guarantee that that’s a scam,” warns Paula Deckman, a CPA at Pittsford, N.Y.-based Bonadio Group.
Consider getting help from a pro
CPAs, enrolled agents and tax attorneys have unlimited representation rights before the IRS, which means they can represent you before the agency even if they didn’t prepare your return. They may also be able to tell you whether the audit is simple enough to handle yourself, Deckman says.
Professional help usually costs money, but if you used tax software to file your return, read the fine print — you might have free help coming. Some packages sell or come with audit guidance, which largely means they’ll just explain what the IRS is telling you; others sell or come with audit representation, which means they’ll speak on your behalf to the IRS.
In any case, if you get representation you’ll probably need to sign a power of attorney form so that the representative can access what he or she needs and can act on your behalf. Be sure that the power is limited to tax information and specific tax years. Your tax representative typically doesn’t need access to your medical records or other areas of your life, Deckman warns.
Audit hot spots
- Overreaching travel expenses
- Credit card statements posing as receipts
- Unsupported meal and entertainment expenses
- Strangely high charitable contributions, particularly noncash ones
- Unsubstantiated deductions for auto expenses
- Taxpayer claims a computer died and took the tax records with it
- Mismatches between reported income and income appearing on W-2s
- Lots of round numbers
Start digging through the file cabinet
Many times the IRS is interested in auditing only a part of your tax return rather than the whole thing, Loe says. “The letter will say what they want to see,” he explains.
You should keep your tax records, including supporting receipts, for at least three years. Generally that’s how far back the IRS goes for audits, unless you’ve substantially understated income, overstated expenses or fraud is involved, Loe says.
Get ready to wait
Correspondence audits, which involve mailing information and questions back and forth, can last several months, Deckman says. In some cases taxpayers can switch to an in-person audit.
Keep your emotions in check
Don’t let feelings about the process become part of the audit, Deckman warns.
“I highly recommend to my clients that they generally refrain from communicating with the auditor,” she says. “If the auditor wants to talk to them, I can make that happen, but I will also be present, because I find that people say things that they do not understand the true meaning of. And before you know it, they’re sticking their foot in their mouth and I’m trying to get a crowbar to get it back out of there.”
Tina Orem is a staff writer at NerdWallet, a personal finance website.