What Does an IRS Audit letter Look Like and How Should I Respond?

As we have mentioned in other articles on this website, receiving an IRS audit letter is a stressful event for any taxpayer. There are so many variables in most tax returns and many different factors may contribute to a tax audit.

Reasons For an Tax Audit

Per the IRS, selection for an audit does not always suggest there’s a problem. The IRS uses several different methods:

Random selection and computer screening – sometimes returns are selected based solely on a statistical formula. The IRS will compare your tax return against “norms” for similar returns. They have developed these “norms” from audits of a statistically valid random sample of returns, as part of the National Research Program the IRS conducts. The IRS uses this program to update return selection information.
Related examinations – The IRS may select your returns when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit.

Next, an IRS auditor reviews the return or it may go through a computer review. The return may be accepted; or if something is flagged as questionable, they will identify the items noted and forward the return for assignment to an examining group.

Don't Reply to an IRS Letter Until You Read These Rules!

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What does an IRS audit letter look like?

The image to the right is an example of what an IRS audit letter would look like. It should state clearly what the IRS actions are and ask for your response regarding the matter.

How will the IRS Contact You Regarding an Audit?

Once there is a determination that an audit is assigned to an examiner, the IRS will contact you regarding an audit by letter. They will never initiate contact with you by phone. Be cautious of any unexpected phone calls that come from someone identifying themselves as an IRS agent.

When you receive an IRS audit letter, it will clearly list your full name, taxpayer/SS ID number, form number, IRS employee ID number, and IRS contact information. This letter should clearly identify the primary reason for the audit and what documents you will be expected to provide.

How Should You Respond to an Audit Letter?

Before you communicate with the IRS about an audit, consult with a tax attorney about your options. There are several reasons for seeking out legal counsel.

Often a client will know the answer to this question at the very beginning. But, here are some of the typical reasons why someone would seek out legal support.

If there are questionable items on the tax return
There is no paperwork supporting the items on the return being audited
If the client thinks that the tax return preparer was not honest or knowledgeable

Don't Reply to an IRS Letter Until You Read These Rules!

Don’t communicate with the IRS regarding an audit or tax debt until you read ‘Cohen’s 12 Rules for Dealing with the IRS’. Submit your email below to receive a PDF copy of this 1-page checklist.

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How a Tax Attorney Can Provide Support DURING an IRS Audit

The Internal Revenue Service is not your friend, and they may try to entrap or trip up a taxpayer without representation. Often the client does not want to talk to the Internal Revenue Service at all, and that is fine. The tax attorney, sometimes working along with the accountant, will handle the audit and all correspondence with the Internal Revenue Service, and will control the flow of information. He will also do the necessary research to show the Internal Revenue Service cases and regulations that support the positions taken on the tax return. IRS Form Photo Credit: Tax Audit