January 27, 2010 - William L. Henry IV
A tax audit is often the first step in changing the amount of taxes you owe. In 2007, the IRS audits of individuals increased by 7% from 2006-reaching the highest number of audits since 1998.
Flags for an IRS audit can include returns that may have an incorrect amount based on informational returns filed with the IRS. Other sources of flags for IRS audits are public information such as newspapers, public records, and individuals. Audits can be random as well.
IRS tax audits can be conducted by mail or in person; you can be represented by an attorney regardless of how the IRS proceeds. If the IRS employee proposes an increase to your tax liability, most taxpayers will have 30 days to appeal the decision to an administrative appeals officer. If you fail to respond to the 30-day letter, or if you cannot reach an agreement with the appeals officer, the IRS will send you a letter of deficiency. Most taxpayers will have 90 days to petition with the tax court. If the tax court makes an adverse determination or you do not petition the tax court within the requisite 90 day period, the IRS can assess the tax and begin collections.