How to Handle a Tax Audit and What to Expect

Financial Horizons: Insights for Building Wealth and Securing Your Legacy 

By Dr. Jose G. Cardenas, Chief Tax Strategist at The C & R Group, LLC

The word “audit” is enough to make most taxpayers nervous. But here’s the truth: a tax audit doesn’t always mean you’ve done something wrong. In fact, many audits are triggered by random selection or small discrepancies. The key is knowing what to expect and how to handle the process with confidence.

Why Tax Audits Happen

The IRS may initiate an audit for a variety of reasons:

• Math errors or inconsistencies on your return.
• Unreported income (like 1099s the IRS has on file but you didn’t report).
• Excessive deductions or credits compared to your income bracket.
• Business expenses that appear unusually high.
• Random selection—sometimes it’s just luck of the draw.

Types of IRS Audits

1. Correspondence Audit
   Done by mail.
   Usually requests supporting documents (e.g., receipts, 1099s, proof of deductions).
2. Office Audit
   Conducted at a local IRS office.
   Typically focuses on specific issues (like itemized deductions).
3. Field Audit
   An IRS agent visits your home or business.
   More detailed and comprehensive.

How to Prepare for a Tax Audit

✅ Stay Organized: Keep receipts, bank records, payroll documents, and tax filings in order.
✅ Respond Promptly: Ignoring IRS letters can escalate the situation.
✅ Be Honest and Precise: Provide only the information requested—don’t volunteer extra details.
✅ Know Your Rights: You have the right to representation and the right to appeal.
✅ Hire a Professional: A tax advisor or CPA can manage communication, prepare documentation, and protect you from costly mistakes.

What to Expect During the Process

• The IRS will notify you by mail (never by phone or email—beware of scams).
• They’ll specify what years and items are under review.
• You’ll have time to gather documents.
• The process may end with:
  No change (everything checks out).
  Adjustment (you owe more or, in some cases, get a refund).
  Appeal (if you disagree with their findings).

✅ Bottom Line

A tax audit may sound intimidating, but preparation and professional guidance make all the difference. If you receive a notice, don’t panic—take it seriously, get organized, and seek expert help to protect your financial future.

About the Author

Dr. Jose G. Cardenas is a retired U.S. Army Finance Officer and the Chief Tax Strategist at The C & R Group, LLC. With a Doctorate in Business Administration and over 20 years of experience in financial strategy, tax planning, and life insurance, Dr. Cardenas helps individuals and business owners protect their wealth and build a legacy. Learn more at www.thecrgroupllc.com.

📌 Disclosure:
This article is for educational and informational purposes only and is not intended to serve as personalized legal or investment advice. Dr. Jose G. Cardenas, DBA, provides tax advisory services through The C & R Group, LLC. Insurance strategies, including Indexed Universal Life (IUL) and annuity products, may be offered through his role as a licensed financial professional affiliated with Experior Financial Group.

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