The IRS conducts audits to reduce the “tax gap” between what they are owed and what they actually receive. Most are initiated as a result of suspicious activity, however, some are random. Typical triggers for an audit include math errors, failure to report income, claiming too many charitable deductions, large losses on schedule C or too many work expenses, home office deduction, and round numbers. Generally, the higher your income, the greater your chances of being audited. Those earning under $200,000 have a less than 1% chance of being audited while those making over $10,000,000 have an almost 20% chance of being audited in any given year.

In most cases, when an audit occurs, there is no face to face interaction with the auditor. Rather, all communication is conducted by mail and the auditor collects all requested information until satisfied. In some cases, there may be an in-person audit at a local IRS office. In these instances, you have the right to bring a qualified representative with you, although not necessarily required. In special situations, field audits may occur where an IRS representative will show up at your work or place of business. These typically occur when there are significant questions raised for the return.

The best suggestion when dealing with an auditor in person would be to remain polite and organize all requested information beforehand. Only present the requested information, no need to expose yourself to additional questions.

Most audits result in a change to the tax return. However, sometimes these changes can work in your favor and result in a refund, although this is not typically the case. If you do not agree to the changes proposed on your return, you have the right to contest the case. If you decide to do so, you may need to meet with an IRS representative to further discuss your case or request a formal appeals.


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