IRS Examination

IRS Examination

Some of you might wonder “why does the IRS audit?” The IRS code grants authority to the IRS to examine taxpayers’ returns, books, and records for the purpose of ensuring that the returns are correct. 

There are several types of audit, and they can be done within an IRS office, in the field, or at a Compliance Center. The simplest audit is usually done at the Compliance Center. It starts with a letter or notice and often conducted by telephone or by letters. Field audits are more complicated types of audits, as they usually involve books and records examination. Revenue Agents usually perform field audits, and this type of audit involves a review of taxpayers’ tax returns for prior and subsequent years.

Good preparation is essential to a good examination result, as examining employees have discretion as to what kind of proof is required. The IRS examiners generally have limited time to complete an examination, and presenting information in an organized way helps establish credibility. The IRS letter will request information it wants to examine, such as bank deposits, proof of deductions etc. It is important to provide them only the documents requested and nothing more. 

When a tax return is under examination, the taxpayer is presumed guilty until proven innocent. In other words, the taxpayer has the burden of proof. When a taxpayer fails to comply with a request made by an IRS agent, the taxpayer is subject to be penalized by additional taxes and penalties. Many taxpayers who receive IRS communications are often frightened and uncertain, and are therefore unable to effectively communicate the information on the notice. Understandably, the audit process can be a very stressful one, and with the IRS’s broad power, they certainly can take advantage if you have no legal muscle on your side. It’s never a good idea to fight an audit alone. As the proverb states, “He who is his own lawyer has a fool for a client.” Treat an IRS audit as seriously as you would a murder trial. If you wouldn’t go to court without a lawyer, then why would you go before the IRS without competent representation? 

At ProTax Consulting Services, managing our client’s expectations is a critical part of our representation of someone who is under examination.  By keeping the lines of communication open, it usually helps our client understand their risks and exposure in the audit.  Parts of our internal audit assessment include:  a review of the validity of the tax return in question,  what expenses look out of line, and what types of document they request. By performing this internal audit for our client, our goal is to gain an insight of the client book, which would help us identify any areas of exposures. The internal findings usually help us better prepare to answer any questionable items that might be raised by the examiner.


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