An IRS audit sounds scary, but really it’s quite common and an audit does not automatically indicate a problem.
What Triggers an IRS Audit?
The IRS uses multiple methods for selecting returns for an audit. You may have been randomly selected based on a computer screening. There are baseline returns that create the “norms” and the IRS may conduct random screenings based on how certain returns compare to the “norms”. They may also select your return based on related examinations. If business partners or investors related to you or your company are being audited, your personal returns may be selected for review as well.
How Will I Know I’m Being Audited?
You will receive a notice in the mail from the IRS, with an explanation of why you are receiving the audit, with instructions on next steps. Some common reasons the IRS sends a notice include; owing a balance, you are owed a larger or smaller refund, the IRS has a question about your return, you need to verify your identity, your return has changed, or there is a delay in processing your return.
You will only be notified of an audit via mail, never by telephone. The IRS will send a notice in the mail to your last known address. If you’ve moved since the last time you filed your tax return, you might not see the notice of audit if you have not set up mail forwarding or filled out a change of address form, which can be found here.
If you receive a phone call claiming to initiate an audit, that is likely a scam, and you should not share any personal information over the phone. The audit itself will also only be conducted by mail or in-person.
Any correspondence you send back to the IRS should have a confirmation of receipt with it. You can request additional service through USPS to ensure delivery confirmation is sent upon the receipt of the item to the IRS.
What Documents Do I Need?
Keeping a record of all tax documents is very important, especially in the case of an audit. The IRS says your last 3 years of tax returns should be kept, at least. Electronic records are fine, but make sure you have access to any tax documents easily. Some types of documents that the IRS may ask for in light of an audit are receipts, bills, canceled checks, legal papers, loan agreements, logs, tickets, medical records, theft & loss documents, employment documents, schedule K-1, etc. If you own a small business or are self-employed, any and all documents related to income, spending, deductions, etc. should always be kept safely and readily available.
How Long Does an IRS Audit Last?
There is no definite timeline of when the IRS tax audit will be over, or how long it will take. IRS.gov states, “The length varies depending on the type of audit; the complexity of the issues; the availability of information requested; the availability of both parties for scheduling meetings; and your agreement or disagreement with the findings.”
The conclusion will end in one of three ways:
No change – You have substantiated all items requested for review, and the IRS won’t be charging you anything or giving you a refund.
Agreed – You have agreed to the IRS proposed changes or requests i.e., owing money or a change to a return.
Disagreed – You have disagreed with the changes proposed by the IRS and filed an appeal within the statute of limitations.
Lastly, Know Your Rights as a taxpayer. As a taxpayer being audited, you have a right to representation and you should contact your tax relief professional as soon as you can to be your support system through the process. If you find yourself dealing with an unreliable auditor, an unresponsive auditor, or one that isn’t accepting your receipts, that’s a definite sign you need to call Tax Relief USA. We are here to support you every step of the way. Our professionals will never ignore you, we are here to help and be on your side. If you are in need of audit representation or have questions about what to do if you think you may be getting audited, contact us here.