What Are The Steps in an IRS Tax Audit?

Taxpayers facing a tax audit are confronted with the first step in a stressful journey through examination, appeals, and possibly litigation. Our team of IRS and U.S. Tax Court attorneys guides clients through the administrative process for an efficient resolution.

The IRS starts an audit or examination by mailing an exam notice to the taxpayer. The exam notice provides taxpayers with crucial information related to the audit, including the subject, the scope, the severity and the type of auditor.

The notice will request the taxpayer to call the IRS auditor within ten days. A savvy taxpayer may elect to have a representative contact the IRS on their behalf. While this call is to schedule the first audit meeting, auditors often try to elicit information in this call.

At this point, the IRS formally requests documents by issuing a Form 4564, Information Document Request (IDR). A taxpayer needs to collect all documentation relevant and responsive to the audited items.

It’s crucial to keep in mind that the IRS may request documents that exceed the audit’s relevant scope. The taxpayer needs to organize relevant documents and determine what information is missing.

At the first audit meeting the auditor begins with a script of open-ended questions designed to elicit further issues, so it’s important to be careful with your answers to avoid expanding the scope of the audit.

The audit then proceeds into the items identified and review of documents.

Ultimately the taxpayer has the burden of proving, or substantiating, the amounts reported on the tax return. If not, the IRS will use the omission of documents to support its determination. Furthermore, the auditor may formally expand the audit to other tax years or items.

After additional meetings and communications the auditor will issue an exam report proposing additional tax, penalties, and interest. A taxpayer should evaluate the auditor’s factual conclusions and legal reasoning.

At this point the taxpayer can (and probably should) challenge the exam report by requesting a tax appeal.

The experienced Kugelman Law team can help throughout the entire process.

  • First, we assess the scope of the audit with the primary goal to keep the audit to that scope.
  • Second, we assess your records and help rebuild any that are missing.
  • Third, we contact the IRS on your behalf and take the lead at all audit meetings and communications. Often, our clients never meet or talk with the IRS.
  • Finally, we assess the audit report and advise on the most efficient way to move forward.

Kugelman Law tax attorney Alexander Kugelman has worked as a U.S. Tax Court clerk and is uniquely skilled at handling tax audits. Contact us today for your tax audit consultation.