The IRS is conducting more and more audits via the mail – 78% in 2010 compared with 54% in 2000.
The average labor cost for a field audit is $2834 compared with $135 for a correspondence audit. These audits are initiated by a notice for proposed tax return changes. Taxpayers must respond with proof that the change is not appropriate within 30 days. In the case of no response, the IRS is assumed to be correct so don’t procrastinate.
The benefits of retaining a CPA to handle any audit can't be overstated. We may be able to anticipate the analysis that will be performed by the auditor upon receipt of the requested materials. We can pre-perform the calculations to find discrepencies in advance. This allows for research on the cause of differences so an explanation can be provided to the IRS with the documents.