Learning that the IRS wants to audit you is an overwhelming prospect. It is natural to feel concerned, but keep in mind that some audits result from random selection.
Even if the IRS has questions about your tax return due to errors or oversights, there is no reason to panic. Here is what you can expect during an audit, and what you can do to navigate the process efficiently.
What happens during an audit?
You will receive a notice via mail that the IRS wants to conduct an audit. In some cases, you may be asked to provide documents regarding your taxes and finances via the mail. In other situations, the IRS will schedule an in-person interview. The interview can take place at their office or at your home or place of business. Read the initial correspondence closely for instructions.
How many years of tax records can the IRS review?
It is common to review the last three years of tax records. However, it typically depends on the seriousness of the oversight and the information needed to clarify it. In most cases, the IRS will not go further than the previous six years. The agent conducting the audit will work with you to ensure they have the proper information to make a decision regarding the issue.
What happens at the end of the audit?
If the information verifies that your initial return was correct, no change will occur. If the new information shows that an error occurred, the IRS will recommend changes, which they will implement if you agree with their decision. If you understand the changes but disagree with the proposed actions, you can ask for a meeting with the IRS manager. You can also go through mediation or request an appeal.
How long does the process usually take?
It typically depends on the situation. Complex issues that require comprehensive review naturally take longer to conduct. This is especially true if numerous in-person meetings must take place.