The process of selecting a return for an audit usually occurs in one of two ways.
First IRS uses computer programs to identify returns that may not include all W-2 or 1099 Income, as compared to waht was reported by Employers or Companies that hire Independent Contractors.
IRS is not above, and admits, to obtaining information about taxpayers income from sources such as newspapers (news), public records, previous returns, averages, and OTHER individuals! If IRS decides that the information is accurate, they may audit your return.
Audits, or “Examinations" as IRS calls them, can be handled by mail or in person.
If your return is examined by mail, IRS will send you a letter asking for more information. You can respond by mail or you can request an interview with an examiner.
If IRS wants to “see" you they will conduct your examination via a personal interview.
If you do not agree with what the examiner tells you in your meeting, you can meet with the examiner's supervisor.
If you don't agree with the examiner or the supervisor you can appeal to the Appeals Office of IRS.
A taxpayters Appeal Rights are explained in Publication 5 and Publication 556, Examination of Returns, Appeals Rights, and Claims for Refund.
If you do not wish to use the Appeals Office or disagree with the outcome you can take your case to the U. S. Tax Court, U. S. Court of Federal Claims, or the U. S. District Court where you live.
It is our suggestion, depending on the nature of the audit, that if IRS says “Examination", you say “Enrolled Agent"
Cassandra Ingraham is a Tax Accountant and Instructor for Basic Tax Classes in the San Francisco Bay Area. During the balance of the year she can be found at http://www.taxeswilltravel.com providing Formal Introductions to Lenders for Accounts Receivable Funding (Factoring) and Purchase Order Funding.
Individuals with Tax issues can find dozens of self-help tax articles at: http://taxeswilltravel.com/article_index.htm