You are here: Home Finances Taxes For People ... How To Survive A ... Summary
Information about all aspects of finances affected by a serious health condition. Includes income sources such as work, investments, and private and government disability programs, and expenses such as medical bills, and how to deal with financial problems.
Information about all aspects of health care from choosing a doctor and treatment, staying safe in a hospital, to end of life care. Includes how to obtain, choose and maximize health insurance policies.
Answers to your practical questions such as how to travel safely despite your health condition, how to avoid getting infected by a pet, and what to say or not say to an insurance company.

Summary

If you receive notice of an audit, DO NOT PANIC. Read the notice carefully to see exactly why you are being audited. Please do not think that the IRS is out to "get" you. Remember, a computer chose your return for audit. Yes, it is unfair that you should have to deal with this on top of everything else, but if you approach it calmly and carefully it will go a lot more smoothly.

If the deadline for filing your new return is approaching and you are being audited, your new return could be audited as well. Consider postponing the filing of the new return by filing an extension. You can then file the new return after the audit is complete. NOTE:  When filing the extension, be sure to pay any taxes you expect to owe to avoid penalties.

At the conclusion of the audit, the examiner will present you with an agreement form for you to sign if you agree with the result. 

  • If the IRS makes no changes to your return, you will receive a letter in a few weeks stating that the examiner proposed no changes to your return. Keep this letter with your tax records.
  • If the audit determines that you are due a refund, you will receive the money soonest if you sign the agreement form when it is presented to you at the end of the audit.
  • If the audit determines that you owe money and you cannot readily pay the amount due, read: "Paying The Piper."

If you do not agree with the resuilt of a tax audit, you can appeal - first informally, and then formally.

The following sections tell more about the above subjects: 

NOTE:

  • For information about what to do to avoid a tax audit in the future, click here.
  • For information about free tax counseling, click here.

Start by reading IRS Publication #1 "Your Rights as a Taxpayer." You can get it at www.irs.gov/publications/p1/index.html offsite link. Also consider reading the more extensive "Publication 556: Examination of Returns, Appeal Rights, and Claims for Refund", which you can read online at www.irs.gov/pub/irs-pdf/p556.pdf offsite link.

Do I Need Professional Help With An Audit?

We suggest that you seek professional assistance regarding anything beyond a simple correspondence audit, even if it's just for a consultation. If you had an attorney or CPA prepare your return, consult with that person and consider having that person represent you at the audit.

Retail tax preparation services (such as H&R Block) usually provide representation services. Weigh the cost of the tax you might owe against the cost of using a professional to represent you.

A tax professional advises that even if you do have someone represent you, try to attend the audit. Especially if you're not looking or feeling well, it may pay to muster the energy to show-up and draw on the Auditor's compassion.

NOTE: If needed, free tax advice is available.




How To Delay An Audit After Receiving A Notice Of An Audit

Delaying an audit could save you money. IRS auditors are instructed to close audits within 28 months of the later of the date you filed your tax return and the due date.

The longer your file is open, the more likely the auditor will want to reach an agreement. Thereâ€-s even a chance it could be dropped if the auditor has more pressing cases.

On the downside, keep in mind that if you lose the audit, you'll have to pay interest on any amounts you owe. Also, if your life expectancy is short, your heirs won't have you around to defend yourself against the IRAS. You're  the person who knows best why your returns contain what they do.

Some methods you can use to delay an audit are:

  • Respond to all inquiries before the deadline specified by the notice you receive, but don't respond right away.
  • Ask for as much time as possible to prepare for the audit.
  • If you aren't well, a day or two before the audit, ask to reschedule it, using your illness as the reason.
  • Ask to have issues explained to you in writing.

How To Survive A Tax Audit

Following are some tips to help you stay in control when you attend an audit.

Be Prepared

Assemble all the information you have on your questioned income, deductions and credits. Match your numbers to the proper receipts and account statements. This will help you be ready to support the items in question.

Use the sick card.

Your instinct when going into public is likely to be to look your best. However, if the effects of your health condition are visible, an auditor is liekly to be sympathetic to your situation. Tax auditors are human beings.

  • If you do not look well, do not try to hide the fact with make up.
  • If you have lost your hair, this is a good time not to wear your wig.
  • If you lost or gained weight, clothes from "before" would emphasize that fact.
  • If your residence looks like an ill person lives there, or if you take a lot of prescriptions, ask for an audit at home. This is known as a "field audit." It couldn't hurt to leave your medications in a place where an auditor is likely to see them. Make sure the bottles are in a place that a stranger would think of as logical. For instance, do not leave them on the coffee table in the living room. (For information about field audits and other types of audits, click here.)

Consider tape-recording the audit

You can make an audio recording of the audit, provided that you make a request in writing. You must notify the examiner at least 10 days in advance and bring your own recording equipment. This could be especially helpful if you have problems with your memory.

Strongly consider telling the auditor about your condition even if it arose after the period for which you're being audited

Despite our conception of auditors as monsters they actually are human and might be disposed to getting you through the audit more easily if they know you are ill.

Don't give the auditor any additional documentation or information he or she doesn't ask for.

Volunteered documents and information could raise more questions than they answer. If the auditor needs something he doesn't have, he'll ask for it.

Don't give the auditor information about previous tax years

Sometimes, an auditor may try to get information from you about tax years other than the one(s) listed on your audit notice. Unless related to an item that carries over from a previous return, you don't have to provide this information. Consider responding to the request politely with "I don't believe that relates to the year or issues being examined."

Do Not Lie Answer questions truthfully. 

Do not volunteer information.  Answering questions truthfully does not mean volunteering information that is not asked for. Just like furnishing extra documents, volunteering information can be opening a can of worms. The only one who is fishing is the auditor. 

If you sense that the audit is not going well, it probably isn't.

Demand a recess to consult professional help. Contact an experienced accountant or tax attorney right away.

If you think the auditor is treating you unfairly, ask to speak to the auditor's manager.

Be friendly and cooperative

While an audit is not a social event, it cannot hurt to be pleasant. The auditor is just a paid employee like anyone else. Anything you do to make the auditor's job easier could help his or her attitude toward you and the audit.

To Learn More

What To Do If You Disagree With The Results Of A Tax Audit

You do not have to accept an audit report.  Appealing is simple and costs nothing unless you use a tax professional.

  • It is worth noting that about half of those taxpayers who challenge their audit report receive at least a partial deduction in fees.
  • On the other hand, interest will continue to accrue on the amount you are claimed to owe. It is also possible that the appeal officer will raise additional issues which could cost you more money.

Even though appealing is not complicated, you should still think about whether the additional time and stress required is worth the potential reduction in taxes, especially if you are very busy or not feeling well.

Appeals And Tax Court

If you do decide to appeal the results of an audit, the first thing you can do is to request an informal review of your audit with the auditor's supervisor. This can be an immediate meeting if your audit takes place in an IRS office or a teleconference. It may be possible to make some sort of compromise with the supervisor, who will prefer your appeal not go any farther.

If you are unable to reach an agreement with the examiner or the examiner's supervisor, your case will automatically be forwarded to the IRS appeals office for processing. Within 30 days you'll receive a letter notifying you of your right to appeal and give you instructions on how to do so.

IRS Publication #5, Your Appeal Rights and How to Prepare a Protest if You Don't Agree can help guide you through the process. Download it at www.irs.gov/pub/irs-pdf/p5.pdf offsite link.

If your appeal fails, you can still file a petition in tax court.

If the audit bill is less than $50,000 for any one year â€" the total bill could be higher if multiple years are involved -- you'll be able to go to tax small claims court, where it only costs $60 to file your case and you aren't required to have legal representation. Tax small claims court is the only court that will hear a case before the tax is paid. On the downside, tax small claims court doesn't allow an appeal. You'll be stuck with the opinion of the presiding judge. (There is no jury in this court.)

With the assistance of an attorney, you can also appeal to the United States Tax Court, the United State Court of Federal Claims, or the United States District Court. These courts are independent of the IRS. While these appeals are more expensive and time consuming than tax small claims court, you can appeal decisions and have your case heard by a jury, at least in the lower court. For appeals to the U.S. Court of Federal Claims and U.S. District court, you must pay the tax first.