A return can be picked up for audit for many reasons. If the return is not correctly filled up and excess tax relief is claimed, the IRS is bound to take up the issue with the tax payer. Sometimes the information given in the return may not match with the information returns filed by other persons with the IRS.
For instance, information given in the Form W-2 filed with the employer may not tally with the return filed by the employee leading to examination of the employee's return.
There is a risk management mechanism in place in the tax office with certain objective criteria for selection of returns for audit. The criteria may change from year to year.
Information gathered from the press and the electronic medium may also act as triggers for examinations.
In many cases, the audit is done through correspondence. The tax payer may receive a mail from the IRS asking for certain information or some clarifications. Copies of supporting documentation may also be sought.
The correspondence should never be taken lightly. In simple cases, it may be possible to clarify the matter and examination may be closed and the return accepted. It is not necessary that all audits must lead to creation of fresh demand on the tax payer.
In some cases, the correspondence audit may develop into deeper examination through interviews. The tax payer has a right to seek a date of his convenience. The interview cannot be postponed indefinitely, though.
Another important right is the right to be represented by someone else. The tax payer can appoint a representative who can appear on his behalf.
The authorized representative has to be appointed in writing and only those persons qualified to appear before the IRS such as tax attorneys, certified professional accountants can be appointed. You may refer to Publication 1 "Your Rights as a Taxpayer" of the IRS.
An authorized representative can take away much of your burden. Being well versed with the tax laws and the procedure, he will be able to handle the audit process better.
However, you need to assist him well. The tax proceedings turn on documentary evidence which will need to be provided to the representative. The representative will have the power to file documents and receive documents and make submissions, both oral and written on your behalf.
Sometimes the IRS may like to conduct the examination at the business place or the office of the tax payer. They have powers to do so. It is advisable to guard against such a situation by providing full cooperation to the IRS in respect of details and documentation required by them.
If the interviews at the tax office are properly handled, there may be no need for on the spot visits by the tax man. Publication 1 of the IRS website www.irs.gov gives details on your right as a taxpayer.
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