Did you receive an audit notification? Every audit notification may not be legitimate and it is important to make sure it is official. The Internal Revenue Service (IRS) will notify you either by letter or phone. The IRS does not notify taxpayers about audits through email. If you do get an email stating you have been selected for an audit, it is probably fraudulent. If you determine that you are definitely getting audited, your next step is to learn what is involved.
What is an Audit?
According to the IRS, an audit is “a review/examination of an organization’s or individual’s accounts and financial information to ensure information is being reported correctly, according to the tax laws, to verify the amount of tax reported is substantially correct.”
It is an audit — not an arrest or trial — so do not panic. Contrary to popular belief, an audit does not automatically mean you made a mistake. However, an inconsistency can trigger an audit if there is a discrepancy between what is on a tax form and what was reported. The IRS may choose to audit a taxpayer based on random selection or statistical formula. Also, an audit may be less intrusive than you feared. For example, it may be entirely through the mail. Although in some cases, it may be at an office, taxpayer’s home, or place of business.
Both businesses and individuals may be audited, even sole proprietorships, and there may be some differences in how they are handled. One thing that all audits have in common is access to records. Did you deduct business expenses or make some substantial charitable contributions? Be prepared to show the IRS receipts. The good news is that in many cases the IRS accepts electronic records.
What Happens Next?
There is no typical length of time for an IRS audit, but if you have your records handy and cooperate fully and quickly, you increase your chances it will be as brief and painless as possible. Ultimately, the IRS may determine that you owe more money. At this point, you can pay it or appeal. The audit does not have to be the end of the road. There is a substantial appeal process and a long, expensive court trial may not be necessary.
The important thing to remember is that you do not have to go it alone! Our professionals can work with you throughout the audit process, including any appeals. The key factor is to call us as soon as you receive the notification about your audit. We are ready to work through the details and help you gather any records you may need.