No one looks forward to receiving a letter from the IRS notifying you that you have been selected for an examination, also known as an IRS tax audit. The IRS may choose to complete the examination by mail by requesting additional information about certain items on your tax return, or they may complete an in-person examination.
Just because your return is selected for an audit, it does not automatically mean that something is wrong. The IRS uses automated methods to select returns for tax audits, but an audit does not always result in an increase in your tax bill.
However, you still want to be cautious whenever you are selected for a tax audit. If you have any concerns about items on your return, you should strongly consider consulting with a tax attorney before you speak to the IRS. If you make false statements to the IRS, or if you accidentally say something that can be used against you, it could lead to more serious problems, including criminal tax charges.
The notice you receive will tell you what part of your return is being examined, and what records you will need to provide. The examination may take place in your home, at your place of business, an IRS office, or the office of your representative.
You have the right to represent yourself at the in-person audit, or to have a representative with you. You can also have your representative act on your behalf by filing a form 2848 Power of Attorney. You can also ask to suspend the interview at any time to leave and consult with your representative.
If you believe you will owe additional tax following the examination, you can prevent interest from accumulating by paying all or part of the amount you think you will owe.
The IRS may also ask you to agree to extend the statute of limitations. The IRS generally only has 3 years from the date a return is filed to make a tax assessment, and if the statute of limitations is about to expire, they may ask you to agree to extend it, either indefinitely or for a specified period of time.
After the examination, the auditor will either accept your return as filed, ask for additional information, or propose changes to your tax return. If you disagree with the auditor’s determination, you have the right to appeal his decision to the IRS Appeals Office.