11 Steps To Help Your Client Through An Audit

Oct 26, 2023

Every year, the IRS audits thousands of people. This can be an intimidating process for your clients, but there are things you can do to prepare them for the auditing process and protect them through it.

Hopefully, your office filed the disputed return, and you have all the information you need in your cloud-based tax preparation software. If not, and you are dealing with a new client, have them upload all related documentation through the client document management software. A document management system with a client portal saves time, allowing you instant access to all pertinent information so you can familiarize yourself with the case.

1. Offer To Represent The Client With The IRS

You can guide the client past common pitfalls as a representative. All communication should go through you so the client doesn’t inadvertently complicate their case and increase the taxes owed to the IRS.

2. Request A Copy Of The File

Seeing the IRS file of the pre-audit investigation ahead of time will give you an idea of what they’re concerned about. You can focus your evidence gathering to address those issues.

3. Prepare For The Audit

Find documentation to support all deductions. Verify the preparer filled out the return correctly using income tax preparer software, especially if the client or another office filed the return. Verify the numbers are correct based on the provided information. Look for gaps and discrepancies. Have everything ready before the interview.

4. Keep The Scope Narrow

Clients may provide too much information, which will allow the auditor to dig deeper than necessary and broaden the scope of the audit. Never bring records into the room from a different tax year than the one they are auditing. Don’t provide documentation for things they didn’t specify in their request or documents for any year not being audited.

5. Ask For More Time

Your client is well within their rights to request more time to gather information. Justify your request with a logical reason and give your client the time they need to get prepared.

6. Avoid Field Interviews

If possible, meet with the auditor at their office or yours, not at the client’s home or residence. The average penalty is higher in field interviews than in-office interviews.

7. Restrict Access To The Client

In most cases, you can complete the audit without the client present or have them under your supervision when meeting the IRS auditor. Instruct them to:

  • Keep all answers concise.
  • Provide only answers to their questions; don’t volunteer information.
  • Avoid unnecessary conversation.
  • Only bring necessary employees when requested.
  • Avoid onsite tours when possible.

8. Maintain Control Of Documentation

Never give the IRS the original documents. Give them copies and keep the originals to refer to later if necessary. Save copies using online tax software so you can access them from anywhere.

9. Instruct The Client In Audit Etiquette

The audit will proceed more smoothly if everyone remains calm. Avoid idle conversation and stick to the matter at hand. Avoid emotional outbursts even if you disagree with their decisions. Outbursts never support your cause.

10. Be Prompt

Ensure the IRS gets all documentation and information before the due date unless you need an extension. Then, make sure you request the extension before the deadline. Keep things professional.

11. Appeal Unfair Decisions

There are options if the IRS auditor is unreasonable. The first step is to request the auditor’s supervisor to review the file. A simple phone call will suffice. It doesn’t guarantee the supervisor will change the outcome, but there are several reasons why your auditor may be harsh. They may just be having a bad week. A supervisor can overturn an unreasonable and unsupported decision.

You can ask for a fast-track appeal. This expedited appeals process acts like a mediation between the auditor and the client. If mediation doesn’t yield a fair response, you can formally protest with the IRS Appeals Commission. The average wait time is eight months for your first interview, twice the fast track average.

The final step is to take the case to court for a judge to decide. Whether you have to go through the process of an appeal or not, don’t be afraid to ask for fee waivers. The auditor might be open to dismissing the fees if they agree the discrepancy was an honest mistake. The worst they can say is no.

To Review

While an audit may be daunting and unpleasant for your clients, the challenges are manageable. Just keep the following guidelines in mind. Less is more when it comes to information. Provide everything they ask for and no more. Keep all documents in an electronic document storage database for quick access. Be calm and timely in your responses. Limit the auditor’s access to information outside their audit’s scope. And appeal unreasonable decisions. With adequate preparation, you can move forward, protect and encourage your client, and gain a happy customer for life.

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