IRS Tax Audit – Guidelines, Procedure, Flags and More


IRS Audits can be grueling. You must provide accurate receipts, statements, invoices, books, and records. Your best bet may be to seek professional help, but here is a guide for those who want to handle an IRS Audit on there own. With most audits, get a professional’s help because the outcome typically far outweighs the cost.

IRS Audit Notice, Procedure and Guidelines

The first mistake you can make is ignoring your Audit Notice. You must respond to the IRS within 30 days of receiving notice to prevent the IRS from automatically accessing your tax liability and subsequently sending you a bill for taxed owed.

Read the Audit Notice very carefully and use it to help you determine what you need to bring to the Audit.

Organize your Records

You want to make things as easy as possible for the Auditor. Gather and organize all of your pertinent records.

1) Don’t be afraid to highlight items or attach receipts or adding machine tape if necessary.

2) Replace any missing records. It’s not the IRS’s job to find the records for you.

3) Provide copies of your records, the IRS is not responsible if they lose the original documents

Behave Yourself

This may seem like an obvious choice, but many taxpayers take their frustrations out on their auditors. Even if your auditor seems unreasonable, you must cooperate with him/her. Remember, you are the one in the hot seat, not them.

High Audit Risk

Working in any of the following fields brings a high audit risk.

1) Cash Intensive Business: Hairstylists, Waiters and Mechanics, and other tip-earners fall into this category.

2) Health Care: Doctors and Dentists often run their own offices; this means it is solely their responsibility to ensure all income, expenditures, and deductions are accurately reported to the IRS.

3) Legal Field: Lawyers and Accountants often get in trouble for getting a too bold or creative with their tax filings.

Tax Audit Flags

The IRS looks out for the following Audit Red Flags before they send an Audit Notice:

Unusual Deductions: Taxpayers who make large and unusual deductions are easily spotted.
Income: Here are some indicators the IRS looks out for:

  • Lots of round numbers on a report, like $1,000.00, $100.00, as these are rare in real life.
  • Income does not fit with the price of living for your neighborhood or area
  • Drastic change in income from one fiscal year to the next
  • Incomplete Returns

Medical Deductions must exceed a certain amount of your income or they can not be claimed.

Charity deductions: Receipts are usually not enough to prove Charity Deductions. If large amounts were donated you need to obtain a letter from the charity detailing the donation for your records.

Office/Business Deductions: Many taxpayers get into trouble by claiming office deductions on items that do not qualify. Office supplies like computers, programs, and tools of the trade count, luxury cruises and cars do not. The IRS can easily spot the difference.

Options When Dealing With An Audit

Need Help with a Tax Audit?
Request help with an IRS audit from one of our tax professionals. We can represent you and ensure you the best outcome.

Avoiding An IRS Audit
Understand various ways to lower your probability of being audited and what to look for when completing your tax return

When You are Audited and Can’t Pay Amount Owed
If you are audited, owe more money, and cannot pay you need to know your options. It is safe to say that you know you will have to pay the money in one way or the next. The question is: how are you going to do this if you don’t have the money you need right now?

Tax Audit Detailed Guides

Everything you need to know about tax audits. DIY information on avoiding and resolving tax audits to professional help with paying taxes after an audit and representation with one.

What Should I Do if I Receive an IRS Audit Letter?

Many times audits are done because the likelihood of an error on the tax return is high. Realize that audits can go both ways. Here are some tips to dealing with an audit letter.

When Can I Stop Worrying About an Audit?
The standard statute of limitations on audits is 3 years. Normally if they are going to audit, they will do so within 1 year of the tax return being filed. Sometimes this 3 years can be extended. Here are some details on your rights regarding tax audits.