THERE are three basic types of IRS audits: correspondence, office, and field examinations. Let’s discuss correspondence audits.
1. Do not be afraid to open mails from the IRS. If you are, here’s an antidote to your dilemma: imagine that it’s a refund check. I have seen unopened mail with 30-day letters and 90-day letters (Stationary Notice of Deficiency) that have already expired! It could be an audit notice. If it is, let’s discuss more tips.
2. Respond promptly. You have 30 days to call or write back.
3. If you cannot, request an extension of time in writing before the expiration of 30 days.
4. Address each issue separately. Back it up with logical explanations and supporting documents.
5. Provide schedules to reconcile differences of unreported income and questioned deductions.
6. Gather documentation. Create manila folders for each issue & place checks & invoices inside each folder.
7. Be organized. This is a time when you need to be orderly in gathering and filing. Remember, you will not be there to explain when the agent goes through your stuff. It is therefore critical that the documents be filed in an orderly fashion to facilitate communication.
8. Be convincing and persuasive in your first response. Make it your last response. You do not want a second request or a telephone call that could elicit more audit questions and prolong your agony.
9. Include a copy of the notice to help the IRS personnel match your response with your case files.
10. Send by certified mail with return receipt and tracking number, especially when responding on the 30th day (some folks find it more exciting to wait for the last minute).
If the audit does not go your way and problems start to unravel, consider getting help from a tax pro for damage control. You probably should have done this in the first place. Remember that a tax practitioner can help you sidestep landmines and save you enough tax, penalties, and interests to pay for his/her fees. Good luck!
Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California.
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He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies. He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at [email protected].
