Tax Return Audit, Appeals

The thought of a tax audit terrifies most taxpayers. Even the mention of the IRS can evoke strong emotions from people suspecting that an IRS auditor is there to increase their tax liability rather than give an accurate assessment of their taxes.

According to the IRS the total number of audited individual tax returns increased by 7 percent to 1,384,563 in 2007 from 1,293,681 in 2006. That’s the highest number since 1998. Good tax record keeping is important in case you get audited.

Tax audits are selected by computer programs that calculate which tax returns are most likely to be in error. The auditor then approaches the individual and conducts a line by line analysis of their personal finances.

The IRS has averaged a little bit higher than a 1% audit rate of all individual tax returns. That means that the IRS audits one or two out of every 100 tax returns. Other signals that might trigger an IRS audit include a high amount of deductions compared to income, tax items that are erroneous, or failing to include proper proof or explanation for major one time losses.

There are many preventative steps that an individual can take to avoid a tax audit. If you are already in the process of a tax audit, there are things that you can do to expedite the process and incur minimum unfavorable adjustment to your tax obligation. The most important thing to do to avoid an audit is to keep good records. Good records allow you to easily organize and accurately calculate your tax return. Good records also supply the physical proof for unusual deductions. If you are already in the midst of an audit, absolute compliance is the best way to help your situation. Making things easier for the auditor shows that you have nothing to hide and that you want to get the process over as soon as possible.

Don’t forget to print (either as a hard copy or PDF file) your 2009 tax return and keep a copy for your records. On efile.com you can print your completed and accepted tax return until November of each tax year.   

If you efiled your previous year's tax return on efile.com you will be able to import this data into your new tax return. For example during tax season 2009 you will be able to import 2008 tax return data into your new 2009 tax return. It is in your personal interest and it is very helpful to have your previous year's return available when you start to prepare your 2009 return. It is also important to have prior years' copies of your tax returns in case there are any questions or if you need to provide documentation for schools, banks, etc.
If you are selected for an audit and the auditor determines an increase in your tax liability you are entitled to an appeal. The IRS will send you a letter that explains the proposed adjustments to your tax return. The letter will also inform you of your right to meet with an Appeals officer and how to contact the officer. You must bring supporting documentation to your appeals conference with an Appeals officer.

Get a copy of your tax return in preparation of a tax audit.