Part Two: Are You Ready For IRS ‘Examination’?

Part two: are you ready for IRS examination?In our previous post, we looked at a pair of impending seasons: tax season and audit season. Because the first season leads to the second, Accounting Today recently ran an article to help accountants prepare to help their clients with Internal Revenue Service audits.

The publication urges accountants to use the euphemism “examination” rather than “audit,” believing the substitution helps everyone stay calm.

An enrolled agent (EA) discussed with the publication the different types of IRS “examinations,” including audits conducted by mail and fax. Though these audits are typically the simplest, and they usually require multiple communications (sometimes including a phone call). Misunderstandings between tax payer and tax collector are not uncommon, given that communication is conducted by written word.

The EA also discussed in-office audits in which the auditor meets with the taxpayer (or representative) in a local IRS office. The EA strongly advises taxpayers against attending face-to-face meetings, and instead advises having the representative (CPA, EA, attorney) there.

Also an option: the in-field audit. This is usually conducted at the preparer’s office. The EA said she asks clients not to attend the meetings.

The IRS finds some common errors, one EA told Accounting Today, including honest mistakes and dishonest ones. Common honest slip-ups: treating loans to the business as business income, treating owner draws as expenses and expensing leasehold improvements. Familiar dishonest mistakes, the EA said, include attempts to use the business to write off personal expenses and to make up meal, travel and entertainment expenses.

No matter the reason for the audit, in some cases the IRS will go on expeditions looking for additional errors or misstatements.

Experienced Cleveland tax attorneys can represent you at all stages of an audit, including appeal.

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