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IRS Audit Representation

Person signing a tax document with a black pen

Getting an audit letter from the IRS is unsettling, and most people’s first question is whether they have to sit across a desk from an examiner. Often you don’t. As CPAs, we can represent you before the IRS under a power of attorney (Form 2848). That means we can respond to the IRS, provide the documents they ask for, and meet with the examiner on your behalf. The IRS generally can’t require you to attend alongside your representative unless it issues you an administrative summons.

What you do have to deal with is the deadline on the letter. Read it for the response date and the list of items requested, and then call us before that date rather than after it.

The kinds of IRS audits

An audit is the IRS reviewing a return to confirm that income, deductions and credits were reported correctly. It happens in one of two ways:

  • By mail (a correspondence audit). The IRS asks for documents to support specific items, often a deduction or a credit. These are the most common, and they’re narrower than people expect.
  • In person. An office audit takes place at an IRS office, and a field audit takes place at your home or business, usually for business returns or more complex questions.

The letter will tell you which kind it is and what the IRS wants to see. The scope is in writing, which is one reason not to volunteer material beyond what’s requested.

How far back the IRS can audit

The IRS generally has three years from when a return was filed to assess additional tax (a return filed early counts as filed on the due date). That period extends to six years if you left out gross income of more than 25 percent of the gross income shown on the return, and there’s no time limit at all for a false or fraudulent return or when no return was filed. In practice, most audits cover returns filed in the last three years.

If you’ve never filed for some years, that’s a different conversation. Our delinquent tax returns page covers it.

How the IRS chooses returns

Returns are selected in a few ways: computer screening that compares a return against norms for similar returns, random samples, and links to other returns that are being examined, such as a business partner’s. Being selected doesn’t mean the IRS thinks you did something wrong. Some common triggers are covered in our post on IRS audit triggers for Long Island taxpayers.

What representation looks like

Once your Form 2848 is on file, the IRS contacts us. Here’s what that usually involves:

  • We review the letter and the return, and figure out what the examiner is really asking.
  • We gather and organize the records that support each item, and point out the gaps before the IRS does.
  • We respond on your behalf and handle the follow-up questions.
  • If the IRS proposes changes, we review the math and the law behind them before anything is agreed.

You stay informed throughout, but you don’t have to field the calls. We’ve found that keeping the conversation between the examiner and someone who does this every week tends to keep it focused.

How an audit ends

There are three ways it can go. The IRS may accept the return as filed. It may propose changes that you agree with, in which case you sign the examination report and the additional tax is assessed. Or it may propose changes you disagree with, and then you can ask for a conference with the IRS Independent Office of Appeals or, later, contest the matter in Tax Court after a notice of deficiency. Those deadlines are set by the letters themselves, so they need watching.

If the audit leaves you owing tax you can’t pay at once, the conversation moves to collection, which is our core work. That can mean an IRS installment plan, an offer in compromise, or penalty abatement for penalties added along the way.

For a step-by-step account of the process, read how to navigate a tax audit with clarity and confidence.

Questions people ask about IRS audits

Can a CPA represent you in front of the IRS?

Yes. CPAs, attorneys and enrolled agents can all represent taxpayers before the IRS. With a signed Form 2848, a CPA can deal with the examiner for you and receive the IRS’s correspondence about your case.

Who can help me with an IRS audit?

Anyone with representation rights can. What helps most is someone who reads the audit letter for its actual scope and keeps the response inside it. If the audit relates to a return we didn’t prepare, that’s fine. We start from the letter and the return as filed.

How does the IRS decide to audit you?

Mostly through computer screening against norms for similar returns, random selection, and connections to other returns under examination. Large or unusual deductions relative to income are the kind of thing the screening flags.

Does the IRS forgive honest mistakes?

An honest mistake still has to be corrected, and any tax owed still has to be paid. Penalties are a different matter. If you had reasonable cause, or qualify for first-time relief, the penalties added after an audit can sometimes be removed. That’s what penalty abatement is for.

If you’ve received an audit letter, call Fine & Clear Tax Solutions at 516-209-2594 or request a free consultation. Bring the letter and the return it refers to.