Common Audit Mistakes

May 2, 2012

You thought you were done when you filed your tax return in April. But then the letter from the IRS arrived. Here’s how you can avoid common audit mistakes and keep your tax pain to a minimum.

Read and follow the notice. It will tell you which year’s tax return the IRS is questioning and the items that are being examined. The audit notice also will give you a time frame for responding, generally 30 days. If you don’t respond, the IRS can take action, such as readjusting your tax liability and assessing interest and a possible additional tax penalty.

Contact your tax professional. If your return was professionally prepared, you should contact your preparer for assistance in handling the audit process. If you prepared your own return, you may want to consult a tax professional.

Review and organize your records. The information in the notice should help you determine which documents you need to support the information reported on your return. Replace or reconstruct any missing records. If you can’t produce supporting documents, a questioned deduction may be denied. Also, don’t give the IRS your original documents to keep. Send copies instead.

Be brief. If you’re called for an in-person audit, always take your tax professional with you and answer as many questions as you can with a simple “yes” or “no.” That way, you’ll avoid inadvertently furnishing any information that could prompt the auditor to expand the audit.

Don’t be too quick to pay up. It may seem easier to simply respond to an IRS notice by sending a check to the IRS for the assessed additional liability. But the IRS has been known to be wrong, and you shouldn’t pay tax you may not actually owe. Even if the IRS is correct, you may be able to negotiate a lower payment than the amount specified in the audit notice.

Ken W. Seidel -
Mark R. Shellenberger -