At Solvable, our #1 goal is to help you get into a better financial position through honesty, partnerships, community and doing things the right way. Some of the links in this post may be from our partners. Opinions are the author’s alone.
Last Updated on
If the idea of getting audited by the Internal Revenue Service (IRS) makes your heart race or your brow sweat, you might be surprised to learn that this process isn’t usually as scary as it seems. You can respond to the majority of IRS audits by answering a few simple, straightforward questions. Find out what happens if you get audited by the IRS and how to make the process go as smoothly as possible.
When you receive an audit notice from the IRS, it’s easy to worry that you misfiled or made a big mistake on your tax return. It’s important not to overthink this type of notice, however. Every year, the IRS randomly audits taxpayers, which means the IRS may have chosen you by chance.
If your tax return does include questionable information, however, the IRS may audit you to clear up any errors. The IRS may also take a closer look at your tax return if it has any connections with business associates or other related taxpayers who are also being audited.
You certainly aren’t alone if you don’t want to deal with an audit, but that doesn’t mean you should ignore a notice from the IRS. All notices include timelines for responding or providing the required information, and most allow for 30 days. If you fail to respond by the deadline, the IRS won’t usually attempt to contact you again. Instead, the agency will proceed with revising your tax return to reflect any changes, such as adding income sources. If these tax return changes result in additional charges or penalties, the IRS will notify you.
By ignoring IRS notices, you allow the audit and any collections to happen without your input. If you do respond, however, you may have the opportunity to change the course of the audit and avoid penalties.
Picturing having to undergo an intense interrogation with an intimidating agent? In most cases, you’ll never have to talk with an IRS agent or meet with a representative in person because most audits take place by mail.
Also known as a correspondence audit, this relatively simple process tends to focus on one or two line items on your tax return. Usually, you’ll need to provide proof of income or documentation that supports any deductions you’ve claimed. If you need more time to gather paperwork, you’ll need to make a written request for a 30-day extension.
Although the IRS initiates all audits by mail, some do require in-person interviews. This typically happens when tax return issues are more complex or when you have too many supporting records to submit by mail. The IRS examiner working on your case will determine whether the audit will take place in an agency office, in your home, at your business, or in your accountant’s office.
No matter what type of audit you have to complete, you’ll typically need to provide the same type of paperwork. In general, the IRS requests documentation that supports income, expenses, and deductions, which you’re required to keep for three years after filing your return. In most cases, you’ll want to have the following records on hand during an audit:
Your audit might be over in a few months, especially if you respond to notices quickly and provide complete documentation to clear up questions. However, some audits are much more time-consuming, especially if they deal with tax returns from more than just the current year.
In most cases, an IRS audit can include three years of tax returns. If the agency discovers an egregious error that affects additional tax returns, however, the IRS examiner may look further back. The IRS doesn’t generally include more than the prior six years in an audit.
Whether you’re corresponding by mail or meeting for an in-person interview, there’s a good chance that the IRS examiner will propose at least one change to your return. You’ll have the opportunity to accept the revision as proposed or contest it. If you oppose the change, you may have to initiate a formal appeal or meet in person with an IRS examiner.
Keep in mind that these changes don’t always mean bad news for you as a taxpayer. You may ultimately receive a tax refund after an audit.
If your audit results in a larger tax burden, you may owe back taxes and penalties. The IRS will send you a statutory notice of deficiency to confirm how much you owe.
Even if you can’t pay your new tax debt immediately, you won’t want to ignore this notice. If you fail to pay your debt, you may be subject to wage garnishment, federal tax liens, or other consequences. To avoid these issues, respond to your notice in a timely manner to request an extension.
Dealing with an IRS audit can be daunting, so it’s important to remember that you have rights as a taxpayer. You have:
Whether you just learned that you’re being audited or you already have a substantial tax debt, we’re here to provide the resources and solutions you need. Contact Solvable to get the tax debt relief you need today.