Examinations (Audits)

Most returns are accepted by the IRS as filed. In the event that your return is selected for examination, it does not imply that you are a dishonest taxpayer. In addition, the inquiry and/or examination does not always result in more taxes due. In some cases, a refund is issued. In others, the case is closed without change.

Normally the process of selecting a return for examination beings in one of two ways. The first step involves the use of computer programs to identify any tax returns that may have incorrect amounts. These programs may base their search criteria on studies of past examinations, on information returns such as Forms 1099 and W-2, or on certain issues identified by compliance projects. The second step involves the use of information from outside sources that also indicated any returns that may have incorrect amounts. These sources include and are not limited to newspapers, public records, and individuals. In the case that the information obtained from these two steps is deemed accurate and reliable, the return may be selected for examination.

Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund, explains the rules and procedures that are followed in all IRS examinations.

Below is an overview of how IRS examinations are conducted.

By Mail: Many of the examinations and inquiries are handled by mail. A letter is sent to the selected taxpayer either requesting for more information or a explanation of why a change in the return may be needed. Taxpayers can respond wither by mail or can contact the IRS and request a personal interview with an examiner. In the case the taxpayer elects to mail the requested information back to the IRS or provide an explanation, the IRS will explain the reason for any changes to the return, regardless if the IRS agrees and accepts the reasoning. If the taxpayer does not understand why the change is taking place, he/she may contact the IRS and request further explanations.

By Interview: In the case that the IRS notifies the taxpayer that an examination will need to take place through a personal interview, the taxpayer has the right to request that the interview be scheduled at a reasonable time and place that is convenient to both parties. In the event that your interview date, place, or time is changed, you will be notified of the reason for the changes. If you feel that the change is an inconvenience, you can contact the interviewer's supervisor.

Repeat Examinations: In the event that for the second consecutive year, your return was being examined for the same item, and no change to your tax liability was made, you are requested to contact the IRS at your earliest convenience to request the discontinuance of the examination.