IRS audits are rare, and most of them are done by mail. You will, however, have to send a complete and timely response. Face-to-face IRS audits are even rarer, but it’s important to take a careful look at your record so you can be prepared for the audit interview. The determination of the IRS agent isn’t final, so you have the right to appeal. You can also get expert help and can even have a professional tax preparer represent you in an IRS audit.
The IRS doesn’t perform audits at random. They select returns that are most likely to have errors, and they base it on a complex set of criteria. After you file a return, the IRS usually has three years from that date to start and finish an audit. But they start most tax audits within a year after you file the return, with most of them being completed in less than a year.
How the IRS Audits Returns
The IRS will audit returns in the following ways:
- By mail (which is referred to as a correspondence audit).
- At an IRS office (which is referred to as an office or desk audit).
- In person at your home or place of business (which is referred to as a field audit).
During an audit, the IRS will ask you for any information or documents that can explain your position with regard to the tax return. It’s important to provide them with information exactly as they requested. And if you have a licensed tax preparer taking care of it, you can help this person by providing any relevant facts.
What to Do When the Notice Arrives
Getting a letter from the IRS can make some taxpayers nervous, but you don’t need to panic. The IRS sends notices and letters when they need to ask questions about a taxpayer’s return, let them know about a change to that person’s accounts, or request a payment.
Here are some things you should do once you receive a letter or notice from the IRS:
- Read the letter carefully — Most IRS letters and notices are about federal tax returns or tax accounts. Every notice will deal with a specific issue and will list any steps you need to take. A notice may reference changes to your account or list any taxes you owe. It may also make any payment request or inform you of any specific issues on a tax return. It’s important to take prompt action, because it can minimize any additional interest and penalty charges.
- Review the information — If the letter is about a changed or corrected tax return, you should review the information and compare it with the original return. If you agree with the changes, you should take notes about the corrections on your copy of the return and keep it for your records. In most cases, you only have to act if you don’t agree with the information, if the IRS asks for more information, or if you have a balance due.
- Take any requested action (including making a payment) — The IRS and any authorized debt collection agencies send letters in the mail. You can also access digital copies of certain IRS notices by logging into your IRS Online Account. And if you’re struggling to pay your tax bill, the IRS has several options that can help you.
- Only reply if you have been instructed to do so — You only need to respond to a notice unless you have been told to do so. There’s usually no need to call the IRS. But if you need to, you should use the number listed in the upper right-hand corner of the notice while having a copy of your tax return and the letter with you.
- Let the IRS know of a disputed notice — If you don’t agree with the IRS, you should follow the instructions on the notice to dispute it. Include any information and documents for the IRS to review while they’re evaluating the dispute.
- Keep the letter or notice for your records — You should keep any notices or letters you receive from the IRS. This includes any adjustment notices where the IRS takes action on your account. You should keep records for three years from the date you filed the tax return.
The IRS will never contact you via social media or text message. The first way they will contact you will always be in the mail. If you’re not sure if you owe money to the IRS, you can look at your tax account information on their website.
If you’re looking for a CPA in Corpus Christi that can help you with any tax situation, be sure to get in touch with Jennings & Hawley.