Common IRS Audit Questions & Answers: Tax Overview

8 Common IRS Audit Questions & Answers

Common IRS Audit Questions & Answers 

8 Common Questions & Answers About IRS Audits: Nobody ever wants to be audited by the IRS. It can be extremely time-consuming — and depending on the type of audit and work involved — it can become very expensive to the Taxpayer. But just because a person is under examination by the IRS does not mean they will owe any money to the Internal Revenue Service. In fact, it is not uncommon for a taxpayer to undergo an IRS examination that results in an NC or “no change.” We have represented taxpayers across the globe in a broad range of tax audits involving income and reporting related issues. As you can imagine, taxpayers have many questions about the audit process. Here are eight (8) common IRS audit questions and answers:

Do You Have to Personally Appear at an IRS Audit?

One very common IRS audit questions involves appearing personally at the audit. Most of the time, an IRS audit is handled by correspondence — but hat is not always the case. Some examinations are handled in person and usually at the IRS office. With COVID, Taxpayers were often able to appear by conference. In addition, when the audit involves a business, the examination may take place at the place of business —

Do You Have to Produce Documents to the IRS

Generally, at the outset of the audit the agent assigned to the case will issue an IDR (Information Document Request) to the Taxpayer. Most of the time, the requests are relatively benign and ask for information that the Taxpayer may have used into order to substantiate deductions taken on the tax return. Sometimes, the IRS will request documents beyond the scope of what is relevant or proper — and at that time taxpayers may consider opposing the IRS document request.

Do You Have to Have Counsel at an IRS Audit?

No. The purpose of having counsel with you is to help navigate questions that may get uncomfortable and difficult for the taxpayer. The added benefit of having attorney is that only with the attorney will the taxpayer client have the attorney-client privilege. There is a “sort of” protection/privilege with accountants, but it does not provide need as much protection as the attorney-client privilege does.

What if You Do Not Know the Answer to a Question?

If you do not know the answer, then you would tell the auditor that you do not know the answer. You never want to guess at an answer — or make any intentional misrepresentations or omissions. This is especially true, because some agents are very good at the questioning portion of the exam — and they may circle back around later in the audit if they do not believe your responses — and also in order to determine whether they think you are being truthful.

What are Eggshell and Reverse Eggshell Audit?

These types of audits are much more serious, because if a Taxpayer makes any intentional misrepresentation or omission to the IRS agent — it could lead to a referral to the special agents for a criminal investigation. In an eggshell audit, the Taxpayer is holding out information that they don’t want to provide — and has to do a sort of dance between the raindrops to avoid issues and without making misrepresentations or omissions. In a reverse eggshell audit, the IRS agent has information the Taxpayer is unaware that the Internal Revenue Service already has. As you can imagine, these are much more dangerous.

Self-Incrimination at an IRS Audit

Another very common IRS audit questions involves the fear of self-incrimination. If you are concerned about self-incrimination during an IRS audit, that is something you would want to try to handle before the audit — you will want to by bringing counsel with you. If you stop the audit and try to claim the Fifth Amendment — you are almost asking the agent to refer the matter to the Special Agents for a criminal investigation.

Do you Have Agree with the Outcome of the Examination

No, it is important for Taxpayers who either believe the outcome was unfair — or unjust — to take an opportunity to work through the administrative appeal process and protest the outcome. There are many different opportunities a Taxpayer has to pursue at the appeal and post-appeal process.

Can you Challenge the Penalties?

Yes, there are various protocols you can follow did to try to challenge penalties issued by the Internal Revenue Service as a result of the auditor examination. In general, if you’re able to show reasonable cause then penalties should be able to be avoided or abated.

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Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure. 

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