Ask Keryl

Audits


Ask Keryl
The auditor is impossible to get along with. What can I do?
Try some basic psychology. Put yourself into the shoes of that person. Most IRS employees are 9-to-5 types just trying to do a job and get through the day. Their pay is often too low to support a family, particularly in areas with a high cost of living. They deal with hostile and untruthful citizens all day long. Understandably, IRS morale is low. If an agent doesn't seem to like you for some reason, instead of escalating the war, try to clear the air and relieve the tension. For instance, say, "I'm sorry we can't get along. But let's try to get through this and get it over with, okay? If conciliation fails, speak to the agent's manager, whose job is to close cases and smooth things over with taxpayers. While dishonest employees are a rarity at the IRS, if an IRS employee lies or suggests you give her any favors, report her to the chief inspector at 800-366-4484 or write to P.O. Box 589, Benjamin Franklin Station, Washington, DC 20044-0589.
How likely am I to get charged with criminal tax fraud?
Not very. Fewer than 2% of us are ever investigated for tax fraud. And if you are, the likelihood of a civil fine or criminal charge is under 20%. The unofficial minimum amount of taxes owed before the IRS will file criminal fraud charges is over $70,000, in cases involving at least three years of fraud. To some extent, whether you are charged depends on your line of work. Most of those prosecuted for tax fraud work in organized crime or are public figures.
Do I have to let the IRS into my home?
No. An IRS employee may not enter your home without an express invitation from you or another rightful occupant. The only exception is if the IRS has a court order, which is very rare. A field auditor may ask to come in to verify your home office deduction, but you don't have to let him in. Of course, if you don't, he'll no doubt disallow the deduction. Your choice.
I am being audited and the deadline for filing this year's return is fast approaching. Should I file?
Not if you can help it. The danger in filing is that the new return is fair game for the auditor, and she may get permission from her manager to expand the audit to include that return.
I am being audited and I haven't heard from the auditor for months. What can I do to get the audit over with?
Why do anything? IRS auditors are instructed to close audits within 28 months of the date you filed your tax return or the date it was due(April 15), whichever is later. For example, if you filed your 2007 return on April 15, 2008, the IRS wants the audit completed by August 15, 20010. Legally, the IRS has an additional eight months (until April 14, 20011), but auditors are instructed to complete the audit with at least eight months to spare so the IRS has time to process any appeals. If you haven't heard from the auditor, it could mean a number of things. The auditor may have been transferred or terminated. Or your file may be sitting in a pile awaiting processing somewhere in the IRS. When your file resurfaces, a new auditor is under a deadline to close it, which can work in your favor. And, in the best of all worlds, the time limit for completing the audit may expire while your file is in IRS never-never land. So leave the sleeping dog alone.
What are my chances of getting through an audit without owing additional taxes?
Fewer than 25% of audit victims make a clean getaway. The IRS audits half as many taxpayers today as five years ago, but the take per audit has increased. The IRS, thanks to its sophisticated computer selection process, audits only those returns in which adjustments are almost a certainty. Realize the odds are against you and focus on limiting the damage from an audit. For some guidance, see Top Ten Tips for Surviving an Audit.
Can I challenge the IRS if I get audited and don't agree with the result?
You do not have to accept any audit report; you can appeal it by sending a protest letter to the IRS within 30 days after receiving the audit report. If you request an appeals consideration, you will be granted a meeting with an appeals officer who is not part of the IRS division that performed your audit. If your appeal fails, you can then file a petition in tax court. This is a fairly inexpensive and simple process, if the audit bill is for less than $50,000. If it's for more, you will most likely need the help of a tax attorney. Generally, it pays to contest an audit report by appealing and going to court. About half the people who challenge their audit report are successful in partially lowering their tax bill.