Howcast gives us a humerous look at IRS Audits.  This short video gives you the levity you’ll certainly need. Well done. We recommend that anyone receiving the IRS Examination or IRS Audit Letter watches this.

On a more serious note, receiving an IRS letter that your tax return is to be examined is certainly not something to be taken lightly. Perhaps the first question you’ll ask youself is “Why Me?”

Getting a letter that your tax return is to be examined or audited is something no one wants. Your tax return can be chosen for a variety of reasons, otherwise known as IRS Audit Red Flags, or worse, just randomly for no particular reason at all. Just because your return was selected does not necessarily mean you’ve done something wrong. Usually, it just means that something you reported (or failed to report) identified your return as a return which requires closer examination.

IRS audits come in many forms. The most dreaded is the field or office examination. The simplest is the automated underreporter examination or correspondence audit.

The automated underreporter examination or correspondence audit is where the IRS is requesting clarity on an item or series of items you have reported on your return by a computer-generated letter. This is most common where the taxpayer has failed to report items of income that were reported to the IRS by third parties, or that the items reported by others differ from that you put on your tax return. Common items are self-employment income reported on Form 1099-MISC or stock sales reported by your broker.

The more dreaded IRS audit is the office examination where y0u receive a letter telling you your return has been selected for audit directing you to call and schedule an appointment before a tax examiner in the IRS audit. This is a more comprehensive examination and will generally require you to support what you’ve reported with all the appropriate documentation.

Office examinations will almost always require you obtain professional representation from a CPA, tax attorney or enrolled agent who is qualified to represent you appropriately. Undergoing an office examination without representation can be detrimental in almost all cases. Bluffing your way through an IRS Audit just won’t work here.

Unfortunately, the knee-jerk reaction to receiving an IRS Audit letter is to call and schedule an appointment. The more correct response would be to engage a professional to review the IRS letter, review the tax return selected for examination, review the supporting documentation of what you’ve reported, gather information that the IRS has on your return from the applicable transcripts and assess your exposure, if any.

The more crucial, second mistake that taxpayers make is the “do-it-yourself” method. After all, you pay your taxes, you’re an honest person and if you made a mistake you’ll just pay what you owe – right? Wrong! Not only can you be liable for taxes you may owe for your tax return, but you can be liable for more taxes for the year before, the year after and just about any other year the IRS can assess you.

There are many factors to consider. A trained representative can help you to assess your exposure, gather what you’ll need in support of what you’ve reported and even amend your return for deductions you should have taken and didn’t. Wouldn’t that be nice!

Bluffing your way through an IRS audit is just not an option you can afford to take.