IRS Audit Tips: How to Prepare your Client for an 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.

Recommend that Your Client Retain a Tax Professional to Represent Them

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.

Help Your Client Get Their Accounting and Tax Records in Order

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 theIRS. Also, stress the importance of only providing the records and information that the IRS requests.

Remind Your Client They Can Request More Time to Deal with an IRS Audit

Both your client and the IRS will want to complete an audit as quickly as possible, but your client needs to be properly prepared. 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.

Explain the Importance of a Professional Approach when Dealing with the IRS

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.

Discourage Your Client from Accepting an IRS Field Audit

A field audit occurs when the IRS visits the home or office location of the client. This also 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.

Let Your Client Know They May Need to Pay Additional Taxes

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.

Tell Your Client Not to Panic

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.