THERE are three basic types of IRS audits: correspondence, office, and field examinations. Today’s topics are correspondence audits, the simplest of the three. Here are 10 tips for you:
1. Respond promptly. You have 30 days to call or write back.
2. If you cannot, request for an extension of time in writing before the expiration of that 30-day period.
3. Read the exam notice, the list of items that are being examined, and the info document request (IDR).
4. Gather documentation. Create folders for each issue & place checks & invoices inside each folder.
5. 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 the audit.
6. 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.
7. Address each issue separately. Back it up with logical explanations and supporting documents.
8. Provide schedules to reconcile differences of unreported income and questioned deductions.
9. Include a copy of the immediately preceding notice to help the IRS personnel match your response with your case files.
10. Send by certified mail with return receipt, 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!
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Sy Al-os Accountancy Corporation provides accounting and tax services to individuals, corporations, LLCs and business entities. The Firm has a niche in defending taxpayers audited by the IRS and other governmental agencies. The firm celebrates its 38th anniversary in 2015.
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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 704 Mira Monte Place, Pasadena, CA 91101. He has 50 years of experience in accounting, consulting, and tax work.
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The Firm proudly welcomes Arlene Al-os in 2015. She obtained her bachelors of Science in Accountancy from Mindanao State University and MBA from Ateneo de Manila University. She teaches intermediate accounting at UCLA and was a professor of Economics at Asia Pacific College. She has over 15 years of experience including member firms of KPMG and BDO Seidman accounting firms.
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Our readers may call (626) 744-0200 or email tax questions to [email protected]. Please visit our website for about 300 tax tips at www.victorsycpa.com.
