How to prepare for an IRS tax audit?
The traditional view of an IRS tax audit is a face-to-face contact with an IRS auditor. About one-third of IRS “tax audits” are in the form of letters asking for explanations of various tax items on a tax return or supporting documentation. If you receive a tax audit letter from the IRS, examine your records to determine the nature of the tax audit issue. The IRS may want to audit the entire tax return or could audit just a portion of it, for example, meals and entertainment or automobile and travel expenses. If the issue concerns documenting a tax deduction or a tax credit, send the IRS copies of the appropriate documents. Do not send the IRS originals, as they may get lost in the mail or at the IRS. If the tax notice concerns your entitlement to a tax deduction or questions a tax position taken on the tax return, consult your tax advisor before responding to the IRS. A satisfactory explanation can end the matter quickly. In any event, it is important to respond to the IRS in writing.
