Being selected for an IRS audit can be the most stressful experience. The key to reduce your anxiety is to get professional help in the form of a tax attorney. Having professional representation will help relieve the questions and what-if scenarios that go through your brain.

In my previous post about IRS Audit Facts, I discussed how the IRS will contact you, what happens when you file an amended tax return while you’re being audited, and the reasons why your tax return was selected for audit.

In IRS Audit Facts: Part II we will expand on the IRS audit facts. We will discuss how long you should keep your tax returns, what happens when the tax audit is concluded, how far can the IRS go to audit your return, and what to do if you’re not ready for your audit appointment.

The IRS can audit tax returns filed within the last three years. If substantial errors are discovered, the IRS has the discretion to go back further. In almost all cases, the IRS will never go back more than six years. This answers the next question you might ask, how long should you keep copies of your tax returns? Optimally, you should keep copies forever. At the very minimum, six years of tax return copies will suffice.

When the IRS has been completed by the examining auditor it will be reviewed by the case manager. It is IRS policy that all audits are reviewed by managers. If errors are found during the review, the auditor will contact you and advise you what the correction is and what the implications of the error are.

What happens if you’re not ready for your scheduled appointment? First and foremost, don’t panic. Contact your IRS auditor at the number provided on the IRS notification letter. Explain the situation, and let them know what information, if any, is currently not available. In some cases it may be possible for the IRS to proceed. In any case, the IRS auditor will try to work with you to set up another audit appointment.

If there were only one audit fact that I could stress, it would be to hire a tax attorney or other tax professional to represent you. That’s a fact!

source: irs.gov

No taxpayer ever wants to be selected for a tax audit. But if you are selected for an audit there are some facts you should know it.  Here are some true facts about the IRS audit process, directly from the source.

First and foremost, the IRS will never contact you, your tax preparer or your tax attorney via e-mail about an impending tax audit. IRS rules require they contact you and your tax preparer via phone or U.S. mail if you are selected for an IRS audit.

Let’s say that your tax attorney or tax preparer recommended you file an amended tax return. That filing will not affect the audit selection process of the original tax return. But be aware, the amended tax return also goes through the normal tax return screening process and could be selected for audit.

I’m sure the biggest fact you want to know about is how the IRS tax audit selection process works.  The first step in the audit screening process is they review your data against normal returns. The IRS uses statistically tax return models that screen out returns that stand out against the “norms”. These returns are selected as part of the National Research Program which the IRS conducts to update return selection information.

Once the tax return has been identified as a possible audit candidate, it is reviewed by an experienced IRS auditor.  The auditor can accept the file as is, or based on his audit experience, note the questionable item and forward the tax return for assignment to an examining group.

The hard cold fact about the tax audit selection process, is it comes down to a “human” (IRS auditor) decision.

If you are selected for a tax audit by mail or in-person, it is recommended you contact your tax preparer and/or a tax attorney for representation.

For more IRS audit facts, visit the IRS website.

I’m letting everyone know right now! I’m cheating on my income tax this tax season – and you know why? I need the money.

The IRS won’t know that I’m cheating.  I’ll report more charitable contributions than I really did. I’ll claim deductions for the 10 new suits I bought, deduct the mileage for the 100,000 miles I drove, and claim depreciation on my home office equipment, all related to my fake home business.  Heck, I plan on claiming old Aunt Julie as a dependent too!

Just think, the additional few hundred bucks I get will come in handy when I have to pay a tax attorney to keep me out of jail.

That’s if I get caught?

Of course I am only kidding about cheating the IRS.  I would never consider defrauding them in any way. It’s just not worth it!  And I strongly suggest to all you taxpayers, don’t even think about cheating on your taxes.  Here’s why…

The Internal Revenue Service has stepped up it’s compliance with state of the art computer software, and they aren’t targeting the wealthiest taxpayers anymore.  Not only that, as more and more tax returns are filed electronically, the IRS has more time to poke around and review tax returns that deviate from normal computer tax models.  Another great reason not to cheat on your taxes is that the IRS has experienced significant revenue shortfalls over the last few years.  They are putting an emphasis on recovering past due tax debts and squeezing every penny out of taxpayers.

So avoid inflating tax deductions even a little bit, the last thing you want is a tax audit.  If the IRS accuses you of tax fraud, the consequences could be extreme.  If you are found guilty you will have to pay the amount, plus penalties, plus possible interest charges too.  In serious cases, you can be put in jail.  If you’re smart, you’ll want a tax attorney to represent you. You don’t want to know how much that will cost you.

Do yourself a favor, and avoid the temptation to cheat on your tax return.  Better yet, pay for a reputable tax preparer to calculate your tax return for you.  It’s best if the IRS doesn’t know your name!