What Really Happens During an IRS Audit?

Getting a notice from the IRS can feel overwhelming, but understanding what happens during an audit can ease the anxiety. The process might sound intimidating, but it’s often more routine than most people think.

What Is an IRS Audit?

An IRS audit is essentially a review of your tax return to ensure everything was reported accurately and in compliance with tax laws. It’s not always about uncovering fraud. Sometimes, it’s just a matter of clarifying information or resolving inconsistencies.

Why Are People Audited?

There are several reasons why someone might be selected for an audit:

• Discrepancies between your return and third-party data (like W-2s or 1099s)
• Math errors or incomplete information on your return
• Unusually high deductions or credits that stand out
• Random selection through computerized screening

Even if you filed everything correctly, you could still be chosen. The IRS uses various methods to identify returns that may need closer examination.

Types of IRS Audits

There are a few different types of audits, each with a different level of intensity:

1. Correspondence Audit
   This is the most common and simplest type. You’ll receive a letter from the IRS asking for clarification or additional documentation, which you can typically respond to by mail.
2. Office Audit
   You may be asked to bring specific records to a local IRS office for a more in-depth review. This usually focuses on particular issues or questions on your tax return.
3. Field Audit
   This is the most comprehensive type of audit. An IRS agent will visit your home, business, or accountant’s office to go over your records in detail.

What Happens During the Process?

Once you receive notice of an audit, it’s important to respond promptly. The IRS will outline what they need and how they want the information delivered. This could include receipts, bank statements, invoices, or other records that support your tax return.

You have the right to be represented by a tax professional during the audit. Whether it’s a CPA, enrolled agent, or tax attorney, having someone familiar with tax laws can be a major benefit.

How Long Does It Take?

The length of an audit varies depending on the type and complexity. Some correspondence audits are resolved within weeks, while field audits may take months to conclude.

What Happens After the Audit?

At the end of the audit, the IRS will present its findings. There are three possible outcomes:

• No change: Everything checks out, and no changes are made to your return.
• Agreed: The IRS proposes changes, and you agree with them.
• Disagreed: You disagree with the findings, in which case you can appeal.

Your Rights as a Taxpayer

It’s important to know that you have rights throughout the audit process. These include the right to:

• Be treated with respect
• Privacy and confidentiality
• Understand why the IRS is asking for information
• Be represented by a professional
• Appeal the results

How to Prepare for an Audit

If you’re facing an audit, organization is key. Make sure all documents related to your income, expenses, and deductions are gathered and easy to follow. It’s also smart to review the return being audited so you know what the IRS is examining.

Final Thoughts

While an IRS audit may feel stressful, it doesn’t always mean you did something wrong. Often, it’s just a process of verifying information. Staying organized, understanding your rights, and possibly working with a professional can help you get through it more smoothly.