How Do You Know If You’re Being Audited by the IRS?

Unveiling the IRS Audit Process and Identifying the Telltale Signs

The prospect of an IRS audit can strike fear into the hearts of taxpayers, conjuring up images of intense scrutiny and potential financial penalties. However, it’s crucial to understand that not all audits are created equal, and the IRS follows specific procedures when selecting returns for examination.

Types of IRS Audit Letters

If the IRS decides to audit your tax return, you will receive an official IRS audit letter. These letters come in various forms, each with its own purpose and implications:

  • Notice of Audit and Examination Scheduled: This letter formally notifies you of an impending audit and outlines the specific items on your tax return that will be under review. It also includes a deadline for submitting requested documents and records.

  • General 30 Day Audit Notice: Issued after the audit is complete, this letter summarizes the proposed changes to your tax return and provides a form for you to sign if you agree with the findings. If you disagree, you can file an appeal or protest.

  • Notice of Deficiency (90-Day Letter): This letter informs you of unpaid taxes for the specified tax year(s). You have 90 days to pay the assessed amount or file a petition with the tax court.

  • Request for Consideration of Additional Findings: This letter accompanies a report that proposes adjustments to your tax return. You can sign and return the agreement if you accept the changes, or file an appeal or protest within 15 days if you don’t agree.

Red Flags: Indicators of an Impending Audit

While the IRS typically initiates audits through official letters, there are certain red flags that may suggest you’re being audited without explicit notification:

  • Unusually high tax refund: A significantly larger refund than expected could trigger an IRS review to ensure the accuracy of your return.

  • Mathematical errors: Simple math errors on your tax return, such as incorrect calculations or omissions, can raise red flags and increase the chances of an audit.

  • Inconsistent information: Discrepancies between the information reported on your tax return and other sources, such as W-2 forms or bank statements, can引起IRS审查。

  • High-income earners: Individuals with higher incomes are statistically more likely to be audited by the IRS.

  • Business owners: Business owners, especially those with complex tax situations, face a higher risk of being audited.

  • Unreported income: Failing to report all sources of income, including side hustles or investments, can significantly increase your chances of being audited.

  • Excessive deductions or credits: Claiming excessive deductions or credits without proper documentation can draw the IRS’s attention and lead to an audit.

What to Do If You’re Being Audited

If you receive an IRS audit letter or suspect you’re being audited, it’s crucial to take the following steps:

  1. Respond promptly: Adhere to the deadlines outlined in the IRS letter and submit the requested documents on time.

  2. Gather your records: Organize all relevant tax documents, including receipts, bank statements, and investment records, to support your claims.

  3. Consider professional help: If you’re facing a complex audit or have concerns about the potential outcome, consider seeking professional assistance from a tax attorney or accountant.

  4. Be prepared to negotiate: The IRS is often willing to negotiate and compromise on audit findings. Be prepared to present your case and provide evidence to support your position.

  5. File an appeal if necessary: If you disagree with the audit findings, you have the right to file an appeal or protest. Follow the instructions provided in the IRS letter to initiate the appeals process.

Remember, an IRS audit is not necessarily a sign of wrongdoing. It’s simply a review process to ensure the accuracy of your tax return. By understanding the types of audit letters, recognizing the red flags, and taking the appropriate steps, you can navigate the audit process with confidence and minimize any potential negative consequences.

Former IRS Agent Explains the Number One Reason You Get Audited, Its Your Audit DIF Score.


Can the IRS audit you without notice?

The interview may be at an IRS office (office audit) or at the taxpayer’s place of business, or accountant’s office (field audit). IRS employees conducting audits may call taxpayers, but not without having first attempted to notify them by mail.

How long until you know you’re being audited?

Correspondence Audits This kind of audit is typically initiated within seven months of filing your return. For a faster mail audit process, respond to the letter promptly with complete and accurate information pertaining to the question at hand. If you need more time, you can request a one-time 30-day extension.

How do you tell if the IRS is auditing you?

Remember, you will be contacted initially by mail. The IRS will provide all contact information and instructions in the letter you will receive. If we conduct your audit by mail, our letter will request additional information about certain items shown on the tax return such as income, expenses, and itemized deductions.

Do you get audited by the IRS?

Although the IRS audits only a small percentage of filed returns, there is a chance the agency will audit your own. The myths about who or who does not get audited—and why—run the gamut. The looming myth out there suggests the audit process is something to be desperately feared.

Do you have to tell the truth about an IRS audit?

In other words, the IRS is simply double-checking your numbers to make sure you don’t have any discrepancies in your return. Sometimes state tax authorities do audits, too. If you’re telling the truth, and the whole truth, you needn’t worry. Nothing is inherently sinister about an IRS audit or state audit.

Can a small business get audited?

Simple math mistakes and failing to sign a tax return can trigger an audit and incur penalties. Taxpayers should report all income from Form W-2, Form 1099, and any cash earnings. Small business owners and limited partnership participants are at greater risk of an audit. 1. Overestimating Charitable Contributions

Can you predict an IRS audit?

In the end, there’s no sure way to predict an IRS audit, but these 19 audit red flags could increase your chances of drawing unwanted attention from the IRS. The IRS gets copies of all the 1099s and W-2s you receive, so be sure you report all required income on your return.

Leave a Comment