Women Today

Freelance writer Judy Kneiszel talks about taxes in the most recent issue of Women magazine. For our blog readers, she also explains what they can expect if they get word they're being audited:

There are several types of audits:

--The mail audit is that notice or letter asking you to explain something or requesting additional information.

--The interview audit is an IRS request for you to bring your records and returns to an IRS office for review.

--The field audit is when the auditor visits your office to review your records. This is more common for a business than an individual.

--If you have been selected for an interview or field audit and you have a lawyer or accountant, ask them to attend. Having a trusted financial advisor at your side will make you more comfortable, and might shorten the process a bit, since, hopefully, he or she speaks the same language as the IRS agent.
During an audit, IRS personnel will review your tax returns, receipts, logs and anything you used to compute your returns. Specifically, they will look at four areas:

1. Income: The auditor will want to make sure you reported all income and will ask to look at bank statements, sales records, alimony receipts, pension income, tax refunds and any other funds that came in.

2. Deductions: Over deducting is a common red flag that causes a return to be audited. The auditor will want to see receipts and possibly cancelled checks, credit card statements and any other documentation you can use to back up your deductions.

3. Previous returns: The IRS agent will study previous returns to determine if similar adjustments or deductions have been made. They are looking to see if there is a pattern of trouble.

4. Previous audits: If you have been audited before, the agent will look at the results.

After an audit, the agent will send you a copy of the “Revenue Agent’s Report.” It explains the agent’s analysis and lists any additional money owed.

You can sign the waiver enclosed in the report and pay the tax you owe or, if you disagree with the amount, you can pay the tax, then apply for a refund.

A third option is to request a hearing with the IRS Appellate Division. This takes the audit to the next level for review.

When questions arise, www.IRS.gov is a thorough and easy-to-navigate Web site that provides answers.

“People are afraid of the IRS,” says Green Bay CPA John DeYoung. “But they are not unapproachable.”

Judy Kneiszel is a freelance writer from De Pere and owns The Word House LLC with her husband, Jim. Tomorrow, she'll talk about which documents you should be keeping.