How to Prepare Your Client for an IRS Audit

a tax professional preparing her client for an audit

“Tax audit” is a term that strikes fear into the heart of even the toughest business person, but the truth is there’s plenty you can do to help your clients through an IRS investigation. The right support from you will go a long way towards helping your clients deal with the audit by providing the required accounting and tax information and minimizing difficulties, late tax payments, or penalties.

1. Offer to act as a representative

Sometimes tax laws can be confusing, and it’s vital that your client has the proper representation from a tax professional. If you’re a CPA or enrolled agent yourself, you may be comfortable representing your client. If not, recommend a tax expert who can act on your client’s behalf.

2. Help organize their tax records

A smooth audit depends on having accurate and verified records. Work with your client to get their records in excellent order so they can be presented to the IRS in a clear and transparent way. Encourage your clients to keep good records throughout the year, so they have easy access to the right information if it’s required by the IRS. Also, stress the importance of only providing the records and information that the IRS requests.

3. Request more time to prepare

No doubt your client and the IRS will want to complete an audit as quickly as possible, but your client needs to be properly prepared. Inform or remind them that they can delay an audit within reason if they need time to put together records to support the figures reported on the tax return.

4. Provide guidance

A professional, straightforward approach will be well received by the IRS. This means providing information promptly, replying to letters quickly, ensuring your client understands what is being asked of them, and responding appropriately. Your client should only answer the questions asked in a succinct, honest, and concise way. It’s also vital that your client stays polite and cooperative — arguments and emotional responses will not get them very far with an auditor.

5. Discuss audit types and options

A field audit occurs when the IRS visits the home or office location of the client. This allows them to request more documents and ask more questions. Encourage your client to visit the local IRS office instead or deal with audit requests via letter.

6. Prepare them for a possible tax bill

If the IRS decides to audit your client, it’s because they have identified something that could be suspicious on a tax return. While it’s true this may sometimes be an oversight, in many cases, this could result in more tax being owed. If your client does owe more tax to the IRS, they can often set up a payment plan to pay back any penalties or overdue taxes.

7. Reassure them

The IRS is trying to get the tax they believe is owed to them. If your client has made an honest mistake, it’s likely the IRS will simply ask for the tax due, plus any interest that may have accumulated. In those cases, when the audit results are announced, as long as everything is fair, your client can pay the back taxes owed. Remember, too, that your client can appeal the audit results within theIRS and that there are escalation processes if they disagree on audit results.

This article was last edited on July 28, 2021.

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