An IRS audit is a review of an individual’s or organization’s financial records to ensure that the reported tax information is accurate and that the correct amount of tax has been paid. Audits can be conducted through the mail or in person, and the process can vary depending on the complexity of the case.
Why Do Audits Happen?
The IRS uses a variety of methods to select tax returns for audit, including:
- Random selection: Some returns are selected randomly for audit.
- Computer screening: The IRS uses computer programs to identify returns that may contain errors or inconsistencies.
- Related examinations: If the IRS audits one taxpayer and discovers issues related to another taxpayer, the second taxpayer’s return may also be audited.
How Will I Be Notified of an Audit?
The IRS will notify you of an audit by mail. The letter will provide information about the audit, including the type of audit, the issues being examined, and the documents that you need to provide.
What Happens During an Audit?
The audit process can vary depending on whether it is conducted by mail or in person.
- Mail audits: For mail audits, the IRS will request that you provide documentation to support the items on your tax return. You will have a certain amount of time to respond to the request.
- In-person audits: For in-person audits, an IRS auditor will meet with you to review your records and discuss the issues being examined. The auditor may also request additional documentation.
What Should I Do If I’m Audited?
If you receive an audit notice, it’s important to take the following steps:
- Gather your records: Collect all of the documents that you need to support the items on your tax return.
- Review the audit notice: Carefully review the audit notice to understand the issues being examined.
- Contact the IRS: If you have any questions about the audit, contact the IRS auditor assigned to your case.
- Cooperate with the auditor: Provide the auditor with all of the requested documentation and answer their questions honestly and completely.
What Happens After an Audit?
After the audit is complete, the IRS will issue a report that summarizes the findings. The report will state whether the IRS agrees with your tax return or if adjustments need to be made.
- If the IRS agrees with your return: You will receive a letter stating that the audit is closed.
- If the IRS makes adjustments: You will receive a letter explaining the adjustments and the amount of additional tax that you owe. You will have the opportunity to appeal the adjustments if you disagree with them.
An IRS audit can be a stressful experience, but it’s important to remember that the IRS is simply trying to ensure that you are paying the correct amount of tax. By following the steps outlined above, you can help to make the audit process as smooth and painless as possible.
Additional Resources
What the IRS is actually looking for that could trigger a tax audit
FAQ
How serious is an IRS audit?
Am I in trouble if I get audited?
What is the penalty for being audited by the IRS?
Are IRS audits bad?
But remember – you shouldn’t panic. There are different kinds of audits, some minor and some extensive, and they all follow a set of defined rules. If you know what to expect and follow a few best practices, your audit may turn out to be “not so bad.” A little background first. There are three types of IRS audits: mail, office and field audits.
What happens if you get audited by the IRS?
An audit may result in no change to your return, or a finding that you owe taxes, or even a finding that the IRS owes you a refund. An unfavorable initial determination by the IRS agent you meet with is not necessarily final. You have a right to appeal it and, if still not satisfied, go to court.
How do IRS audits work?
The IRS manages audits either by mail or through an in-person interview to review your records. The interview may be at an IRS office (office audit) or at the taxpayer’s home, place of business, or accountant’s office (field audit). Remember, you will be contacted initially by mail.
What happens if I get selected for a tax audit?
If you’re selected for an audit, the IRS will send you a letter about it first. The audit may be conducted entirely by mail or through a face-to-face interview at a local IRS office, your home, your tax preparer’s office or your business.