FAQ 7: Tax Audit Examination

Q: I recently received a letter from the IRS that said my tax return was selected for an audit examination. How can I make this process less painful?

A: The IRS typically selects tax returns for examination based upon red flags such as unreported income or larger than normal deductions. A smaller amount of tax returns is selected at random for audit. Preparation is the key to successful audit defense. The IRS examiner will have many questions about the tax return. It is not recommended that the taxpayer handles the audit on their own because anything the taxpayer says could be used against them. If the IRS examiner starts to get suspicious about the taxpayer, the scope of the examination may increase for the tax return at issue and may open additional tax years to the audit. Legal counsel will answer the IRS questions and support the positions taken on the tax return to minimize the assessment of additional tax. Taxpayers with substantially underreported income or overstated deductions should stop all communications with their accountant upon receipt of the audit examination letter. In this situation, the accountant may be forced to testify against the taxpayer. Attorney-client privilege prevents the government from compelling the attorney from disclosing confidential communications related to legal advice.