Ask The Experts: I've Been Audited; Now What?


Q. I have been under an audit for close to a year and have over $10,000 in accounting fees. It started with a real estate related company that I had to close because of the subprime mess and then the IRS auditor expanded it to 2005, 2006 and 2007 for my company, an LLC, and my personal returns. That is nine returns. It was so bad that my regular accountant of five years quit. That's right, he dropped off my records on my door step with a letter stating that he would no longer work with this auditor.

It has been a complete nightmare. This was a field audit of every single entry for three years in three entities.

It really demonstrates how broken our tax code is. I am just a little guy that they might expect to get thousands from. They should be going after the guys who are taking home millions and paying no taxes. Like some of those bank executives. -George

A. You've become an unfortunate victim of the IRS magnifying glass. It's not uncommon for the IRS to begin auditing one year or one entity, and then expand the scope to include additional years and entities. If the auditor finds things early on that raise suspicions and lead her or him to believe you may have additional tax issues, then the next logical step is to expand the scope of the audit.

Unfortunately, the taxpayer is at the mercy of the IRS and the burden is on you to prove your income and deductions. I recommend that you find another tax professional to help you finish this process. You should not try to handle this yourself. It's probably best if you find a tax accountant who has a great deal of experience with audits. They're less likely to be scared off by an auditor with such a large scope.

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Tracy Coenenis an On The Money contributor, fraud investigator and forensic accountant, and is the author of Essentials of Corporate Fraud.