Although the chances of being audited are slim, it can be a stressful situation if and when it does happen to you. The I.R.S. can audit you up to three years from the date your return was filed. It is good practice, however, to keep all documents and a copy of your return for at least five years. When choosing a business or individual to audit, the I.R.S. uses a system called Discriminate Function, or D.I.F., in which a norm is established for certain tax brackets and circumstances. Those who deviate the most from this tax return norm are more likely to be chosen for an audit. If you are chosen, you will have at least a month to prepare your tax documentation. Since most audits are handled through the mail, you will probably not have to meet initially with an agent. If the auditor finds problems with your return, he or she may request a meeting in which you may bring along your tax preparer. Bring all documentation to this meeting and answer all questions calmly and directly. When your audit is complete, one of three decisions will be made: you owe money, you owe nothing, or you are entitled to a refund. If it is found that you owe the I.R.S. and you disagree, you may appeal the decision to the auditor's supervisor who will re-evaluate your return. For more information, talk with a tax preparer or attorney about tax audits.
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