In an article published this past Sunday in the Chicago Tribune, Kathy Kristof sounded a warning for Americans preparing to go into their annual mellow, summertime mode–sharks may not be the only predator lurking nearby to disturb their vacation plans; the IRS has geared up to make this summer a busy one for tax audits.
As Kristof points out, tax audits used to be mainly one-on-one, personal encounters between the taxpayer and the IRS agent. Now, though, the IRS conducts most audits by mail through what is commonly known as “correspondence audits.” According to a CPA quoted in the article, 80% of all IRS audits are conducted solely by mail.
Kristof makes 6 important points in the article.
First, the majority of IRS audits are focused on one or two issues on a taxpayer’s return. That means that if the taxpayer can adequately address the IRS’s questions with good records that the taxpayer has maintained, the audit might be relatively quick and painless. That’s the good side of a correspondence audit.
Second (and here comes the bad side of a correspondence audit), since the audit is limited in scope, if the IRS agent is not persuaded by the taxpayer’s answers or records, the taxpayer may find himself having to battle it out with the government in court sooner rather than later.
Third, if a taxpayer prefers to have the audit conducted by the IRS agent in person rather than by mail, he has that option; he need only request that the audit be converted to a more traditional, personal audit. That option may not be what most taxpayers would want to avail themselves of, but it is still an available option.
Fourth, the taxpayer has the ability to know all the ground rules and procedures of an IRS audit–they are all published and available to the public to read.
Fifth (and this is good common sense advice, the kind your mother would probably give you), play nice with the IRS if you’re under audit. In other words, be polite and treat the agent with respect. After all, he is just doing his job, and you’re not going to impress anyone, acting like a bully or getting angry. At the same time, you should be as calm as possible under the circumstances. Developing a tic or clenching your jaw is probably going to make you look like you’re hiding something.
Lastly, don’t go it alone with the IRS. Abraham Lincoln once said that a person who represents himself in court has a fool for a client. That goes double, I would think, for a taxpayer under audit by the IRS. The best course to follow if you get an audit letter this summer from the IRS is to take a deep breath, and then pick up the phone to call your tax representative. Hire a tax lawyer you trust to act on your behalf in your dealings with the IRS. That way, you may still be able to enjoy more beach time this summer, sweating in the sun, and less time sweating over the tax code.