“IRS Examination” is a nice way of saying “IRS Audit”


Audit ChecklistMillions of taxpayers file tax returns annually, and the IRS accepts most of the returns as they are filed.

There will always be returns selected for tax examination, also known as a tax audit, and your return could be one of them.

When your return is selected for audit, it doesn’t automatically mean that the IRS thinks you’re being dishonest about your income or your deductions.

Maybe your tax preparer made a math error, or put a number in a wrong field on your return. If you used Turbo Tax or another software application to prepare your taxes, you may have misunderstood what the program was asking and took deductions you didn’t qualify for.

Anything can trigger the IRS computer system to flag your return as one that needs a deeper look. When your tax return is selected for audit, the IRS will send you a letter and request more information, or they will write and tell you they believe a change is needed to your return.

Know your taxpayer rights

You have the right to ask the IRS to clarify and explain anything you do not understand. This is especially important when they want to make changes to your tax return that result in a higher tax bill and a balance due. Don’t blindly accept what the IRS says and agree with their proposals just because you think that will make them go away, or because agreeing seems like an easy fix.

A very common audit trigger is the income reported on your tax return

Maybe you had three jobs in one year, and forgot about one because you only worked a few weeks. Perhaps you moved, and a W-2 didn’t reach you at your new address. Your employer could have given you a W-2 with a major mistake on it, and the correct, re-issued W-2 never made it to the IRS. Maybe you received a 1099-Misc, didn’t know what to do with it, so you threw it away.

In all of these cases, the income on the tax return is incorrect. When the IRS compares the income reported on your return to the W-2’s and 1099’s filed by third-parties, the income difference will be noticed.

The IRS will send a letter asking you why you didn’t claim that income. (That is not a maybe. The income difference will be noted, and if it causes a large enough difference in tax, the IRS is going to come after you for that tax due. They will do that because that is the law. Usually, any mistake or omission causing a $50 difference in tax is enough for the IRS to go after)

In a case like this, where the problem is simply a missing W-2, it is very possible the audit could be handled via mail and/or a couple of phone calls. If the IRS agrees with your answers to their questions, or you agree and allow them to make the changes they want to your tax return, the audit could be closed. If you owe more tax, you will get a bill in the mail.

If you disagree with the IRS, you have the right to request an in-person meeting with an IRS representative. If you and the representative don’t agree, you can escalate the issue to a supervisor or a revenue agent.

Be careful trying to deal with the IRS on your own!

Be careful if you represent yourself before the IRS, even with what seems to be a “simple” paper audit. When the IRS contacts you about an audit, they have already looked at a lot of information and decided you are guilty. It’s up to you to prove your innocence.

If you make a mistake and volunteer information the IRS is not asking for, that could give them cause to open an audit on another tax return, or go deeper into the tax return in question and ask for many more details. You could say or do something that would cause the IRS examiner to flag someone else for audit. You could be involved in an audit of your personal tax return, and due to a slip of the tongue or a misplaced piece of paper, cause the examiner to open an audit on your business, and vice versa.

Guilty Until Proven Innocent

An IRS audit, no matter how small, is serious business. Don’t ignore any IRS correspondence! Get help if you don’t understand the letter the IRS sent to you, or if your correspondence to the IRS is being ignored. 

When you receive that IRS letter, get expert help. Find a tax expert in your area and ask for references and call those references. Ask for a tax pro recommendation from friends or members of business groups you belong to, request a meet and greet so you can talk to the preparer face to face and see what your instincts are regarding that person.

Even if you feel comfortable after the initial first meeting, ask for references and follow up! Make sure that tax pro is a competent one! Your income, your paycheck, your bank account, your home – everything you own could depend on it! 


Have you ever been the subject of an IRS audit? If so, how did that go for you?

If you received an IRS notice in the mail tomorrow stating you owed thousands of dollars, what would your first reaction be?


Share Button

Leave a Reply