The IRS starts most tax audits within a year of receiving your return. Most audits are finished within a year after that. The criteria the IRS uses to select returns to audit aren’t random. The IRS selects returns that are the most likely to have errors.

Tips to Handle an IRS Audit (Should You Ever Be Audited)

1 - Understand the scope of the audit

In every audit, the IRS starts out by reviewing the information on your tax return to make sure you’ve reported your income correctly. The next step is to compare your return to the information the IRS has on file. This is the crux of most audits.

If the information on your return contradicts what the IRS has on file, you’ll likely be asked to explain.

If the information on your return is correct and matches what the IRS has on file, your return will likely be ready for processing.

2 - Be prepared to answer questions

An IRS auditor may ask you questions about your sources of income, your deductions, business expenses, tax planning, employment expenses, charitable contributions, and many other topics.

If you have requested and received a copy of your records from the IRS, you should review your records before you meet with the auditor. Your records contain detailed, supporting information, which makes them a valuable tool in an audit.

3 - Respond to IRS requests for information on time

When the IRS is auditing your tax return, the auditor must review documents the IRS has on file to verify information on your return. If the IRS doesn’t have the records requested, they may need to reschedule your meeting.

This is one reason why it’s important to respond to requests for information quickly. This may be as simple as providing a copy of a canceled check or as complicated as providing a detailed list of all your business deductions.

4 - If you have a question about the audit, ask

The auditor is there to help you. If you don’t understand an IRS audit notice you’ve received, or if you think you might receive a notice, you should contact the auditor assigned to your case before the meeting begins.

5 - Be prepared to pay any additional taxes

If you receive a bill from the IRS after your meeting, you should pay the amount owed before you respond. If you are at fault and you owe additional taxes, the auditor will help you determine how to pay the bill.

6 - Understand the appeal process

If you disagree with the amount the IRS claims you owe, you always have the right to appeal. If your taxes are adjusted during an audit, you’ll receive a final notice from the IRS outlining the changes. This notice will also explain the timeline for your appeal. The IRS has three years from the date your tax return was filed to collect your additional tax bill.

Conclusion

The IRS audits approximately 1% of all tax returns. They are concerned with the tax system’s integrity, not your personal finances. Most of these audits are basic and routine and can be straightforward and easy to resolve, provided that you know how to handle the situation.

Are you receiving a notice from the IRS? There’s no reason to fear. The team at Tottax is there to help you work through the process and will be with you every step of the way – even if you decide to pursue an appeal. Call and inquire today about tax problem-solving.