Most Americans subject to audit are lucky enough to complete the process entirely through mail. Those who are not as fortunate must meet face-to-face with an IRS agent to discuss the issues of their tax return.
As if an audit itself isn’t scary enough, most people are even more anxious about the in-person interview. IRS agents are trained to scrutinize your financial history, to pick out any flaws with your tax return, and to get you to say something that may incriminate you further. This absolutely justifies taxpayers’ apprehensions.
The best way to ease the anxiety is to prepare for the appointment. It is crucial to prepare/review documents requested in the initial letter, get representation, and to understand what will happen during the interview.
The IRS will choose the location of the appointment, however they will contact you through phone or mail to determine a convenient date and time. You can request a change of location, however it may not be granted.
Where the appoint will take place depends on whether the audit is an office audit or a field audit. The meeting for an office audit takes place in the office of the local IRS branch. Field audits can take place at either your home, your attorney’s/accountant’s office, or your place of business.
Meetings not related to business may take place at your home but will almost definitely take place in your attorney’s/accountant’s office if you have one. The agent will typically discuss issues with itemized deductions, unreported income, or investments on your tax return. They will examine any substantiation you bring and will determine whether you owe money, are owed money, or there is no change to your return.
Meetings relating to business take place at your place of business where books and records are held. The IRS agent is required to take a tour of and review your business facilities. They will want to examine how you operate your business and look at any major equipment you own. The agent will also question you on wheather transactions are made by cash, check, or credit card.
For both business and nonbusiness audit meetings, the agent will begin by previewing your rights and by summarizing what parts of your return/finances are being examined. The agent will then proceed with specific questions.
It is vital to note that if you have representation, you are not required to attend this meeting and it is better if you don’t. By filling out IRS Form 2848, you grant power of attorney to your representative, allowing them to attend the meeting and negotiate with the IRS. This is highly recommended in that it allows an experienced professional knowledgeable in tax law to take control of your audit. This removes not only the possibility of incriminating yourself during the meeting but also removes the anxiety of meeting with the IRS.
If you choose not to proceed with representation, the face-to-face interview will be challenging.
During the interview the IRS examiner may pursue information, such as financial and employment history, in an attempt to find issues outside the specifics of the audit. IRS agents are trained to scrutinize every word you say and every substantiation you claim. Depending on how you respond, you could potentially expand the scope of the audit to issues and tax returns from other years. This can result in what should have been avoidable fines or even criminal charges for the taxpayer. The agent will take advantage of the taxpayer’s lack of knowledge and will attempt to probe damaging information out of them. Any information you give to the agent can be used against you, no matter how innocent it may seem. This can result in substantial penalties and even a criminal investigation regardless of intent.
It is highly recommended that you do not proceed into an audit alone. The Law Offices of Jef Henninger, Esq. are here to negotiate with the IRS and produce the best outcome for our clients.