Here’s What to Do If You Receive an IRS Audit Letter
Few things are more intimidating than when the tax man comes knocking. It is estimated that 1 in 220 people get audited each year. When you receive an IRS audit letter, it might seem like you’re doomed to pay expensive fines.
But being audited by the IRS isn’t the end of the road. Here’s how you can prepare if you receive an IRS audit letter.
What is an IRS Audit?
The IRS contacts taxpayers for many reasons. Just because you receive a letter in the mail doesn’t mean you’re being accused of wrongdoing.
Sometimes, the check on your past tax returns is routine to ensure compliance. An officer is assigned to a caseload and looks into each taxpayer’s deductions to make sure everything looks right.
You might get asked for documentation of certain deductions to verify write-offs. Audits are a great way for the IRS to collect more revenue without needing a new population of taxpayers.
IRS audits aren’t common for most people, but if you make one of these mistakes, you might be more likely to get a visit from an IRS agent:
- Claiming too many business deductions
- Math errors
- Exaggerating charitable donations
- Abusing home office deductions
- Not reporting all of your income
These are just a few of the reasons the IRS might flag your return for an audit. Other times, it’s just random luck of the draw that you’re contacted.
What to Do After an IRS Audit Letter
The IRS is very detailed in the information requested during an audit. If you miss bringing anything to your audit interview, it won’t be because you weren’t given the information.
Go through your entire examination packet with a fine-tooth comb to make sure you both understand the request and have all your documentation on hand. If you’re not sure how to prove certain expenses or deductions are valid, consult with a certified public accountant like https://silvertaxgroup.com/.
You can also meet with an attorney if you’re worried about your legal options in the event you’re unable to pay fines. Unless you’ve got a history of fraud and owe millions in back taxes, chances are slim you’ll go to jail over a failed audit.
The Upside of Being Audited by IRS
Getting your first IRS audit letter actually has an upside. Once you get prepared for an audit, you’ll have an idea of what documents to store over the coming years.
If you’re ever audited again, you’ll be ready for your interview with the IRS agent with detailed documentation. This documentation can be the difference between thousands of dollars in fines and keeping your tax return as is.
It’s rare to get audited by the IRS, but when you do it’s natural to be terrified about potential worst-case scenarios.
Always go through your audit results with your tax preparer to make sure you have a plan in place to avoid future audits. For more information and tips, check out our blog for updates.