Understanding Your Rights as a Taxpayer During an IRS Audit
June 2024
Understanding Your Rights as a Taxpayer During an IRS Audit

Nobody likes paying taxes. Chances are, you get a little nervous when you think about the upcoming tax season. Maybe you’re worried that your math will come out wrong. Perhaps you’re confused about whether the tools for your freelance job count as business expenses or if your dining room table qualifies as an at-home office.

All these worries boil down to the same base concern: you don’t want to get audited. But what exactly is an audit, how can you minimize the risk of one and what should you do if it happens to you? Do you know your taxpayer rights?

What are your taxpayer rights?

Despite common assumptions, the Internal Revenue Service (IRS) isn’t made up of bad guys in suits and sunglasses who want to take your money, dignity and freedom. The IRS wants to work with you to make tax season as pain-free as possible. The irs.gov website carefully lists out the taxpayer bill of rights so you can stay informed. Taxpayer rights state:

  • You have the right to be informed.
  • You have the right to quality service.
  • You have the right to pay no more than the correct amount of tax.
  • You have the right to challenge the IRS’s position and be heard.
  • You have the right to appeal an IRS decision in an independent forum.
  • You have the right to finality.
  • You have the right to privacy.
  • You have the right to confidentiality.
  • You have the right to retain representation.
  • You have the right to a fair and just tax system.

Understanding how audits work

An IRS audit is a review of your financial details to make sure that information is reported accurately on your tax return. You might get randomly selected for an audit when your return is compared to the IRS average. Other times, your audit may be intentional because the IRS finds issues in your return. Getting a notice of audit can be intimidating. This is one of the reasons to work with a tax attorney—they can make the process easier and less stressful.

If the IRS plans an audit, they’ll let you know by mail (not telephone). They’ll conduct the audit either via mail or an in-person interview. The IRS will need your income, expenses, itemized deductions and other documents, so it’s a good idea to keep all your records for at least three years—perhaps even five or six if you want to be extra cautious. But don’t worry—the IRS will tell you which documents they need to see, so you can prepare ahead of time.

To ensure your taxpayer rights during an IRS audit, always stay in touch with the IRS during the audit process. If you mail your documents to the IRS using the U.S. Postal Service, you can ask for delivery confirmation. If you need more time to respond to the audit request, you can contact the IRS agency or call your assigned auditor to ask for an extension. The length of an audit depends on how available you are for meetings and whether you agree with their findings or not. The more open and honest you are, the better—and the better chance your rights as a taxpayer will be respected.

Be patient and smart

An audit can result in one of three conclusions: no change, agreed, or disagreed. No change means the auditor found nothing questionable in your tax return, while agreed means the auditor found issues and made corrections, which you understood and agreed to change. You’ll simply sign the examination report to confirm the corrections.

Disagreed means you understand the changes the auditor wants to make, but you don’t agree with those changes. If you disagree, you can ask for a conference with an IRS manager or file an appeal if enough time is left on the statute of limitations.

You can minimize the risk of an audit with a few precautions

The first and most important rule to follow when doing your taxes? Be careful and honest. This is the best way to minimize the risk of an audit. Here are a few other ways you can help yourself and honor your rights as a taxpayer:

  • Don’t be too proud to pull out the calculator. Math mistakes can result in an audit, even if they were unintentional.
  • When rounding your numbers, always round to the nearest dollar to be as precise as possible. If your numbers look like a tidy interval of $100, the IRS might notice and wonder if you were honest.
  • Are you a generous person? That’s great! Your donations to charity can qualify you for deductions, as long as you keep the donation receipts and other documentation. But if you report false donations or don’t have documentation to prove a valid donation, you won’t get the deduction and may get audited instead.
  • Income from that freelance contract and side jobs matter just as much as the income from a 9-to-5 office job, so be sure to report all income on your tax return.
  • Self-employment, in general, can get confusing. Here are a few things to keep in mind:
    • Don’t file personal expenses under business expenses and hope to claim some deductions that way. The IRS will eventually notice that your business costs a lot of money without falling into the red.
    • Wondering what counts as a business expense? Anything your business truly needs is eligible for a deduction. If you’re a writer who needs a new laptop, that counts as a true business expense. But if you’re an architect who writes poems for open-mic night at the coffee shop, a new writing laptop doesn’t count as a business expense.
    • What about home offices? Let’s say you use your craft room almost exclusively for the sake of your trade. That’s a home office. But if you take your work to the dining room table once a week, that dining room doesn’t become a home office. You must focus your work primarily in one room for it to count as a home office deduction.

If you get audited, LegalShield can help

Having a lawyer on your side is always a great idea. LegalShield’s experienced provider attorneys are ready and willing to assist you—and they know your taxpayer rights. They can answer any legal questions you may have throughout tax season and offer a variety of tax help legal services. If the worst happens and the IRS accuses you of tax evasion or fraud, you already have your LegalShield lawyer in your corner who can help defend your taxpayer rights during IRS audit. Tax season doesn’t have to overwhelm you. Find out more today about how LegalShield can help you through April 15 and beyond.