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    IRS Tax Audit Procedure- Selection, Notification, Examination, And Appeals

    November 18, 2022 | Tax Audits

    An Internal Revenue Service (IRS) tax audit is a review or examination of a taxpayer’s financial information and accounts to check if the reported information is correct as per the tax laws and regulations. It is processed by the IRS officers appointed by the government.

    In the IRS tax audit help, the IRS officers check and analyze every single detail of the financial information of taxpayers to find out if there is any incorrect information and incorrect transactions in the account books. If they find any unreported and incorrect information or transaction, they can ask taxpayers several questions. And if they find taxpayers guilty during their auditing process, they can penalize and charge the taxpayers under criminal sections.

    Well, as a taxpayer, if you are honest and pay your returns honestly, you should not be afraid of tax audits. But yes, you must know the whole procedure of tax audit so that you can be prepared to face the IRS tax audit confidently.

    In this piece of writing, we have comprehensively described the whole procedure of the IRS tax audit. We have covered the selection procedure, notification, examination process, and appeals in this guide. Let’s take a look below.

    The IRS Tax Audit Procedure

    When the IRS selects a taxpayer for a tax audit, it does not mean that he or she is guilty. In the same way, if the IRS notifies you to appear for a tax audit, don’t think that you have done an unlawful act or you are dishonest.

    The Selection Procedure

    The Internal Revenue Service follows certain procedures to select taxpayers for a tax audit. They mainly follow two ways that are:

    Identifying the returns that may have incorrect amounts and checking and analyzing the previous records using computer programs.

    Using the information from reliable outside sources shows that particular returns may have incorrect amounts. These sources can be the newspaper, public records, and undercover individuals.

    So, it is not necessary that if someone is notified by the IRS for a tax audit, he/she is guilty.

    Notifying Procedure

    When the IRS selects a taxpayer for a tax audit, they send a notification mail to the taxpayer to notify about the tax audit in detail. In that notification mail, they mention everything about the reason for the selection, documents and books required for review, venue for reviewing the books and accounts, dates and timings for the tax audit, details of the face-to-face meeting (if needed), and other important information. They can also send a letter by post to request more information and clarification on the incorrect financial information that is reported to the IRS. The taxpayer can respond to this letter by mail. He/she has the right to request a face-to-face interview with the IRS officers for clarification on the incorrect financial information.

    The Examination/Review of the Books and Financial Records

    If the IRS notifies you of a tax audit, you will have to appear for the review of your financial information and records on the given dates and timings at any cost. If you fail to do so or knowingly do not appear for the review of your books, some serious criminal charges can be imposed on you by the IRS authorities. So, it is very important to appear for the tax audit on given dates and timings.

    In the examination/review process, the IRS officers check and match every single financial transaction of the financial year. The financial documents the check during the auditing process are:

    • Receipts
    • Bills
    • Canceled Cheques
    • Legal Papers
    • Loan Agreements
    • Logs or Diaries
    • Medical and Dental Records
    • Theft and Loss of Documents
    • Employment Documents
    • And Schedule K-1
     

    During the examination process, the IRS officers can ask you as many questions as they want, based on their findings. And you will have to have reasonable and genuine answers for all of their questions otherwise, you will be in big trouble. You also have the right to ask why they are asking a particular question to you. So, you can utilize this right during the examination process if you think that the IRS officers are unnecessarily asking you irrelevant questions.

    Appeals

    After the examination process, the IRS officers will ask you whether you agree or disagree with their findings (if they have findings). If you agree, you will be asked to sign the examination report. But in a case, if you disagree with their findings and proposed changes, you have the right to appeal them to the Appeals Office of the IRS. It can take a few court trials to settle things. And it might be possible that it can be both time-consuming and expensive.

    In a case, if you don’t want to use the Appeals Office of the IRS, you may take your case to the U.S. Tax Court, U.S. Court of Federal Claims, or the U.S. District Court where you live.

    This is all about the IRS tax procedure. We hope this piece of reading has been informative and useful for you. For such more detailed information about the IRS tax and audits, keep in touch with us.

    Attorney Timothy Hart

    Timothy S Hart, the founding partner of the tax law firm of Timothy S. Hart Law Group, P.C. is both a New York Tax Lawyer & Certified Public Accountant. His area of expertise includes innovative solutions to solve your Internal Revenue Service and New York State tax problems, including tax settlements through the Federal and New York State offer in compromise programs, filing unfiled tax returns, voluntary disclosures, tax audits, and criminal investigations. [ Attorney Bio ]