Taxpayers often experience anxiety, apprehension and even fear when facing an IRS audit. The agency randomly selects some personal income tax returns for audit and may also audit returns involving other taxpayers undergoing an audit.
Understanding what to expect can help you prepare for the IRS audit process.
The IRS will never request an audit by phone. Instead, you will receive an audit notice by mail. In fact, most audits take place completely by mail, though some require an in-person meeting at your home or an IRS office.
Carefully read the audit notice and follow all enclosed instructions. The IRS will likely request documents related to your return, such as information supporting deductions, expenses and income reported.
Most audits allow electronic document submission, though the IRS may require you to mail or fax information. If you need more time to submit the requested information, follow the instructions on the audit notice to request a 30-day extension. Once you send the required documents, the IRS will review your case. The agency may also ask for follow-up information.
After reviewing the information provided, your case will have one of three outcomes:
- The IRS proposes changes to the return with which you do not agree.
- You agree to changes to the return as proposed by the IRS.
- The audit does not result in any change in tax status.
If you owe money as a result of the agreed-upon changes, you can pay in a lump sum or ask the IRS for a payment arrangement over time.
Always keep copies of your tax records for at least three years. Have these documents accessible in case of an audit. Rarely, the IRS may audit a return dating back three to six years. During the audit, and the subsequent mediation and appeals process if necessary, you can represent yourself or exercise your right to attorney representation.