Navigating through IRS audits might sound daunting, but arming yourself with the right approach can make a world of difference. Here’s a concise breakdown to help you respond effectively in both correspondence and in-person audits.

  1. Clear, Concise, and Credible Responses

Whether you’re dealing with a correspondence audit or facing questions in an in-person audit, remember the three Cs: Clear, Concise, and Credible. Answer only the questions asked and provide clear, straightforward answers. Maintain credibility by never lying, but also understand you don’t have to volunteer unasked information.

  1. What’s in Store for IRS Operations

Expect positive changes in IRS operations thanks to increased funding. Over time, improvements in phone service, electronic filings, and efficiency are likely. However, these changes will take years to implement.

  1. Potential Increase in Audits

The volume of audits might rise in the next 3–5 years due to added funding. Yet, human resource shortages could delay significant impacts on field audit frequency. Correspondence audits could become more effective with improved technology.

  1. Organize Your Financial Records

Stay ahead by maintaining well-organized financial records. Keep track of receipts, W2s, bank statements, and 1099s. Ensure your tax return accurately matches the records submitted to the IRS from various sources.

  1. Avoid Expense Audit Traps

Steer clear of trouble by avoiding vague expense categories like “Miscellaneous” or “Uncategorized.” These can attract unwanted attention during audits.

  1. Preparation Is Key for Audits

If an audit comes knocking, understand the focus—revenues, specific expenses—and set up a filing system to collect and compile relevant data. Print your tax return for reference and gather documents like bank statements and checks.

  1. Seek Professional Representation

Representation is essential, especially if your substantiation has weak points. Enlist the expertise of a tax professional skilled in presenting your information convincingly.

  1. Choose Your Battles

Remember that not every expense needs to be defended. Focus on winning the overall battle rather than every minor detail.

In Conclusion

IRS audits can be managed smoothly with the right approach. Respond with clarity, stay organized, and seek expert help when needed. By following these steps, you’ll be better equipped to face audits confidently and emerge unscathed.


Kelly Coughlin, CPA

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