According to an IRS manager, taxpayers filing an amended return usually do not increase their change of being audited. Russell Renwick, an IRS group manager, said it depends on what item is being amended but, that, in his experience, an amended return does not automatically trigger an audit.
Virginia Puddister, an IRS revenue agent, and Russell Renwick spoke at an American Law Institute-Continuing Legal education conference on Tax-Exempt Organizations. At the conference it was explained that if a taxpayer is chosen for an audit, it is better not to file an amended return after the audit starts. Chances are that the audit group will not get the amended return, and the filing will create confusion. Most audits come through referrals or projects; the IRS does not conduct many random audits.
The most common issues that come up in audits include unrelated business income, employment taxes, intermediate sanctions, unfiled returns, revocation of the exemption and termination cases. Revenue agents prepare for an audit by looking at what triggered the audit, looking at the taxpayer’s website, conducting Internet research to look for information, and studying the organization’s Form 990 information return. An information document requests (IDRs) is issued to obtain information and documents from a taxpayer under audit.
Open communication between the IRS agent and the taxpayer is important; as a team, the taxpayer and IRS attempt to resolve the issue. The IRS will generally assess penalties if the taxpayer owes additional taxes and will put the taxpayer on notice, which will give the taxpayer an opportunity to argue good faith and reasonable cause. The IRS will try to resolve an audit as soon as enough information on the issue is at hand.
