What to Expect From a Tax Audit
Did you know that 72% of tax evasion happens on individual income taxes? The truth is that doing taxes doesn’t come easy to everyone and some mistakes occur by accident.
If you received a letter about a tax audit, you might be wondering what comes next. Read on to learn everything to know about this process and why you got chosen for it.
What to Expect From an IRS Audit
If you were chosen for a tax audit, the IRS might complete it through an in-person interview or by mail. If the interview is in-person, it could take place at any of the following places:
- IRS office
- Taxpayer home
- Taxpayer place of business
- Accountant office
In general, the initial contact will be by mail. Within the letter, you will receive instructions regarding the interview. For example, the IRS provides contact information and additional steps.
If the IRS chooses to conduct the audit through the mail, the letter will note that and ask for additional information from the tax return. You might have to provide answers for itemized deductions, expenses, and income.
There is a chance that you’ll have too many important documents to mail. If this is the case for your situation, you can request an in-person interview instead with the provided contact information.
Tax Audit Selection
Now that you know what happens in a tax audit, you might be wondering why you got selected for one in the first place.
When audited, you are at risk of tax penalties and sometimes criminal charges. You can hire IRS audit defense services to help things go your way.
An IRS audit doesn’t always mean there is an issue with your tax paperwork. There are different methods for audit selection; random selection and related examinations.
Tax return audits are sometimes selected at random. During the computer screening process, a tax return gets compared to others to check for similarities.
If you work with investors or have business partners that were selected for an audit, you might get selected as well. This means your taxes involved issues with other taxpayers.
If the computer process identifies problems with your tax return, an experienced professional will review it. They can accept the tax return or forward the return for further examination.
In the tax audit letter you receive, the IRS will ask for specific documents. If your documents were produced by tax software, you can send the paperwork over electronically.
However you choose to deliver your documents, always request confirmation from the IRS. This will allow you to know if they received your response.
Tax audits have a time limit on them so this is an important step.
Concluding an Audit
After you have provided the IRS with the documents they asked for, the audit may be concluded in one of three ways; no change, agreed changes or disagreed changes. No change is a common outcome.
Agreeing or disagreeing with the outcome will both lead to additional paperwork and sometimes a meeting with an IRS manager.
Understanding what to expect during a tax audit can help you manage the process successfully. If you are subjected to an audit, it is not always because of wrongdoing.
Keep this guide in mind if you receive a tax audit letter at any time. Don’t forget to keep coming back for more articles like this.