Do you need a plan for tax audit defense? An IRS tax audit can leave your world spinning. It’s important to focus on taking the next step instead of feeling overwhelmed by all the potential penalties you may face. Knowing exactly what to expect during the audit process can help ease your anxiety.
What Are IRS Tax Audits?
The IRS sometimes finds cause to investigate a tax return. Receiving an audit letter does not necessarily mean you are guilty of something. A letter simply means that the IRS would like some documentation or clarification regarding an item on your tax return. It is possible that what starts off as a request for more information could turn into an investigation of your finances. This is one of the big reasons you should seek tax audit representation as early as possible.
How Do IRS Tax Audits Work?
If you’ve received an audit letter from the IRS, your tax return was likely noticed due to having a mistake or “red flag.” What happens next depends on what the IRS has found.
The IRS will request specific information or documentation. There is a good chance that you will simply be asked to mail that information to the IRS. However, you may also be asked to meet with an IRS representative. It’s important to know that you do not have to attend such a meeting alone. It is within your rights to bring a representative along to provide support during your IRS meeting.
The information that you provide to the IRS may be satisfactory enough to get your audit case closed without any changes. However, the IRS can decide that you owe additional taxes. What’s more, penalties can be tacked on in certain situations. There is even the possibility that your “simple” audit will turn into a much longer investigation that dives into your past tax returns. You need to know that you can contest any changes the IRS proposes to your return.
Important Things to Know About IRS Tax Audits
A standard audit can last for about three months. The length could be much longer if you’re being audited as a self-employed person or owner of a small business. In addition, the IRS’s backlog will contribute to how long it actually takes an agent to process your audit. Taking the proper steps to comply with an audit and give agents exactly what they’re looking for can often greatly reduce the duration.
One thing that many people don’t realize is that the findings of a tax audit aren’t set in stone. You almost certainly will have opportunities to negotiate and appeal. However, this can be a bewildering task when done alone. A representative will be able to take the proper steps to escalate a case or reach a settlement that works for your best interests. The bottom line is that IRS lawyers are often more than willing to negotiate with someone who speaks the language of the IRS.
What Is the Process for IRS Tax Audits?
Every audit looks slightly different, though there is a general blueprint they follow:
- A taxpayer receives an audit letter
- An audit is conducted by mail or in-person interview
- The IRS will provide you with a written request for specific documents
- The IRS will look at records dating back between one and six years
- The IRS will come to a no-change conclusion, an “agreed” conclusion, or a “disagreed” conclusion
- You will have the option to comply or contest the decision
- You can take advantage of appeal or mediation options
While most audits play out the same way, the IRS can and will change its tactics if it discovers information that requires a deeper dive. Keep in mind that their findings may leave you owing additional tax money to the government.
How to Prepare for IRS Tax Audits
Preparation is key. Having copies of receipts, bank statements, and invoices can help you avoid hassles and penalties. You should keep all records that could be relevant during an IRS audit for at least seven years after filing a return. Having good records will make it much easier to utilize tax relief solutions. Of course, one of the best ways to avoid being audited is to have your taxes prepared by a skilled, certified tax professional each year.
Do You Need Tax Relief Solutions?
The best way to handle an audit is to handle an audit. You should never close your eyes while hoping for the best once the IRS has singled out your return. The Tax Group Center is here to offer IRS audit help at every stage of the audit process. We have a team of licensed tax attorneys, CPAs, enrolled agents, and tax experts waiting to help you get the best outcome. Put industry leaders with 30 years of experience on your side when it counts the most.