You open your mail and you get the notice. You are being audited by the IRS. Now what do you do? First, relax. Then follow these 5 Easy Steps.
1) Read the Notice
I know this sounds basic but you would be surprised at how many people ignore letters from the IRS and other tax authorities. After reading it you will have a better idea what they are looking for. This will make it easier for you when speaking to your CPA about the audit.
2) Determine if This is a Correspondence, Office or Field Office Audit
There are three types of audits. With a Correspondence Audit everything is done through the mail. The IRS requests documents and you mail them in. This is a very straightforward audit. Another type of audit is the Office Audit. This is where you bring in your books and records to the local IRS office. You will meet with the examiner, answer questions and provide documentation. Finally, there is the Field Audit. The IRS auditor will come to your place of business to do the audit.
3) Give a Power of Attorney to Your CPA
For your CPA to represent you, they will need a Power of Attorney. This is done on Form 2848, Power of Attorney and Declaration of Representative. If you are a married couple that filed a joint tax return that is being audited each spouse will need to complete their own Power of Attorney.
It’s possible with a Correspondence Audit you may not need your CPA. Keep them informed however of what you are providing and the status of the audit. With an Office or Field Audit however I would recommend you engage a CPA to represent you.
4) Move the Field Audit to the CPA’s Office
If this is a Field Audit request the audit is moved to the CPA’s office. The IRS will generally grant this request. They will likely however still want to see the place of business where the taxpayer is located. Having the audit at the CPA’s office will minimize the disruption to your business.
5) Keep Good Records
This goes without saying which is why it needs to be said. Keep good records. Even if you’re not getting audited, keep good records. You never know when you might get audited.
Will You Follow These 5 Easy Steps to Take When Being Audited By the IRS?
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Tom Scanlon has over thirty years experience in public accounting with an extensive background in the areas of financial, tax, and estate planning. He prides himself on providing in-depth and customized solutions to privately held businesses and their owners. He is a Certified Public Accountant and Certified Financial Planner®. Tom is a frequent speaker for area organizations and has recently been quoted on CNBC, Fox 61 News and AARP's blog. Tom also has been a guest columnist for numerous publications including The Wall Street Journal, Barron's, Money Magazine, The Hartford Courant, The Hartford Business Journal, and The New Haven Register. He is a member of the American Institute of Certified Public Accountants, the Connecticut Society of Certified Public Accountants, and the Financial Planning Association. Active in the community, Tom supports a variety of not-for-profit organizations.
