If Your Return Is Selected for Examination

Being selected for examination produces more anxiety than almost any other tax event, and the reality is generally narrower than the fear. Most examinations concern specific items on a specific return, are conducted entirely by mail, and are resolved by producing documentation.

The types

Correspondence examination. The most common by a wide margin. Conducted by mail, focused on one or a few specific items, resolved by sending documentation. Many people who have been through one would not describe it as an audit.

Office examination. Conducted at an IRS office, broader in scope, with an in-person meeting.

Field examination. Conducted at your business or your representative's office, the most comprehensive, generally reserved for more complex situations.

Knowing which you have shapes the response, and the notice tells you.

First steps

1. Read the entire notice and identify exactly what is being examined and by what date a response is due
2. Note the deadline — extensions of time to respond are generally available if requested before it passes
3. Pull the return in question and the records supporting the items at issue
4. Decide whether to get representation before responding, because the response shapes what follows

Provide what is asked, and not more

This is the most practical guidance available. Respond specifically to the items raised, with documentation supporting those items.

Volunteering additional information, additional years, or explanations beyond what was requested expands the conversation. That is rarely to your benefit and it is a common instinct — the urge to demonstrate general good faith by offering everything.

Answer what was asked, completely and accurately.

Organize the response

Documentation that is organized, labeled and tied clearly to the item in question is dramatically more effective than a box of unsorted material. Make it easy for the examiner to see what supports what.

Send copies rather than originals. Keep a complete copy of everything you send along with proof of delivery.

Representation

You have the right to be represented. Certain categories of practitioner — including enrolled agents, CPAs and attorneys — can represent taxpayers before the IRS, and the scope of what other preparers can do is more limited.

Representation is worth considering when the amounts are significant, when the issues are complex, when an in-person examination is involved, or simply when you would rather not manage the correspondence yourself.

Ask directly about the scope of representation any preparer can provide for your situation.

Possible outcomes

• No change — the return stands as filed
• Agreed adjustment — you accept a change and address any resulting balance
• Disagreed adjustment — you dispute the proposed change, which leads into the appeals process

Note that an examination can also result in a refund if it identifies something in your favor. It is not a one-directional process.

You have appeal rights

If you disagree with an examination result, there is an established appeals process with its own procedures and deadlines. Understanding that this route exists matters — an examiner's proposed adjustment is not the end of the road.

Deadlines in this area are firm, which is another reason to involve someone knowledgeable before responding rather than after.

What reduces examination risk generally

Accurate, complete returns with income that matches the information returns filed about you, deductions that are documented, and reasonable positions. Not aggressive positions taken on the assumption they will not be questioned.

Selection involves multiple factors, and there is no way to guarantee never being selected. There is a great deal you can do to make being selected uneventful.

Where we fit

RD Precision Tax Service works with clients across Weatherford and Parker County. If you have received an examination notice, bring it along with the return and your documentation, and we will work through what it actually requires.