By Kevan P. McLaughlin
Is there such as thing as an audit season? The answer is yes and no.
Specific behaviors do exist that the Internal Revenue Service and other tax authorities focus on seasonally. The due diligence conducted by tax preparers regarding the Earned Income Tax Credit claims is one. Auditors tend to initiate those exams around the tax season so that they can identify any problem preparer before the next season begins.
The penalties can mount up. Each failure to comply with the EIC due-diligence requirements carries a $520 fine.
Generally, though, an “audit season” doesn’t exist. Such processes won’t begin typically until a year or two after filing a return. That means an audit can occur without notice and often well after the fact.
If you find yourself facing one, there are some things you can and should do:
Organize, organize, organize! Compile receipts, bank statements, invoices, and other supporting documentation in an organized format. Especially where substantiation is a key issue in the case, being prepared will make the IRS audit progress quicker and minimize its expansion to additional issues and periods.
Keep complete records of documents received and submitted to the government. The IRS often sends time-sensitive information that can trigger important legal rights. You may also need to prove what you did or didn’t submit to the tax authorities along the way. Keep such correspondence in a folder in chronological order. Likewise, when you send something to the IRS, maintain a file with copies.
Get contact information for the examining agent and their group manager. Depending on the type and scope of the IRS audit, a taxpayer may need to mail, fax, or even email documents to an IRS agent. Having that information readily available will help keep your audit on track.
Most professional auditors will also offer their manager’s contact information at the beginning of the audit. If not, a taxpayers should request that information. If there is a disagreement with the agent, the group manager is usually the first step in vetting any issues. Obtain the name, badge or employee number, telephone, fax number and address.
Be cooperative and forthright. It pays to be polite, and you should also expect the same in return. Criticizing or condemning the IRS auditor’s conduct and not showing respect for him or her can cause irreparable damage to your case. Moreover, being forthright is critical to avoiding expansion of other issues.
Establish a dialogue on expectations. Seek to set up some understanding on how you’ll play the game. Discuss with the auditor expectations on how soon to reply to any document requests, the estimated completion date of the audit, and the time and place of the examination.
Get copies of IRS documents. The IRS will create an administrative file during the course of your audit. You should request copies of various items along the way. You also have a legal right to information about any third-party contact so don’t be afraid to ask for it.
As the founder of McLaughlin Legal, San Diego tax attorney Kevan P. McLaughlin focuses his practice on all aspects of Federal and California tax law, with a particular emphasis on representing taxpayers in civil and criminal tax litigation and controversy cases.