Most taxpayers should not represent themselves in an IRS audit. Most taxpayers should have their CPA or tax preparer represent them. If they hire their CPA, they should not accompany them to the audit. Why? They might be tempted to answer unasked questions.
In a business audit, someone is authorized by the business to represent their interest. This person will likely be interviewed by the IRS. The business may request a change of venue from their location to have the audit done. You would typically select the CPA's office for the audit to take place. The IRS does not have to grant this request, but it usually does. If granted, they still reserve the right to tour the building where the business is operated.
One possible exception to the rule of not representing yourself is a so-called correspondence audit. This is where the IRS is auditing a return through the mail. Almost all of the communication is done in writing. In this type of audit, depending on the facts and circumstances, a taxpayer may elect to represent themselves if the issue is fairly straight forward.
In over 25 years of practicing, there were only two specific exceptions to the rule of not having the client attend the audit.
- This case involved a professor that traveled to Russia to teach some summer classes. I insisted that he come along to the audit so his testimony could support the deductions he had taken. It worked. There was no change in his return.
- The second case was more difficult. We had not prepared the taxpayer’s returns. He came to us to just represent him in the audit. It is always challenging to represent a taxpayer when someone else has prepared the returns. In this case it was even worse. The tax preparer was ultimately found to have had a history of preparing fraudulent tax returns. There were some glaring errors in this return. Here, we were fortunate to get the balance of the tax reduced, as some of the deductions were allowable. In this case, I also insisted the taxpayer go to the audit. This was to show that the taxpayer was honest and had, unfortunately, gotten involved with the wrong preparer.
How can you have someone else represent you in an audit? They will need to complete Form 2848, Power of Attorney.
ACTION ITEM: If you receive a notice from the IRS regarding an audit, contact your CPA. It's likely you will want to engage them to represent you in the audit.
Thomas F. Scanlon, CPA, CFP®
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