Identification

• If the IRS says you claimed a deduction and should not have, then you have been subject to an IRS audit. The IRS sends you a notice of its intent to audit your return and gives you 30 days to respond to the disputed deductions. Most of the time, the IRS performs an audit through the mail, but the agency can send an agent to your home, or set up a meeting at an IRS office or third-party, such as a lawyer's office.
  
  

Considerations

• In some cases, such as when you have a math error or claim three dependents but only list two names, the IRS can correct your return without performing an audit. If you do not object to a automated adjustment by the IRS within 60 days, the decision is final and you must pay the delinquent tax due and any penalties. You can dispute an adjustment over the phone, especially when have a minor error, such as reporting earnings from dividends as interest.
  
  

The Audit Process

• Gather as much as evidence as possible in preparation for your audit. It is up to you to prove that you can claim the deduction. You cannot, for instance, hand the IRS a pile of receipts and expenses and expect the agency to substantiate your deduction. The IRS usually tells you what documents you need prove your deduction. Sometimes, just being organized proves to the IRS that you have appropriate records and deserve the deduction, according to Roy Lewis of The Motley Fool.
  
  

Tip

• Consider hiring a tax professional to represent you during the audit. You can and should appeal the audit decision, especially when you claim a deduction that is not specifically supported by the tax code or a previous tax court case. An appeals case usually takes between 90 days and year. If you end up losing your case, you will owe the tax due and penalties, which might add up to 25 percent of the total delinquent tax debt.