In this post, we will tell you how the IRS audits a tax return. We’ll share what happens from when they receive your tax return to when they send it back to you after the audit says Aron Govil. Here’s all that information in one place for easy reading.
Let’s get started! (For more detailed information on how the IRS audits returns, see our post How the IRS Audit Works.)
How Does The IRS Audit A Tax Return?
- The first thing the IRS does is assign your case to an agent or examiner at their office nearest you. You’ll get a letter stating this with the contact person’s name and phone number. Sometimes, an agent may call instead of sending a letter. That means he needs do some additional investigation on your return.
- The agent reviews your return and looks for anything that seems incorrect or unusual. This could be something like claiming too many deductions or earning more income than you reported. If the agent finds anything that needs further examination, he will ask you to provide documentation to support what you claimed on your return.
- If the agent can’t contact you by mail or phone, he may visit your home or place of business. He may also ask the IRS’s criminal investigation division to investigate you if he suspects tax fraud.
- Once the agent has finished his review, he sends the case back to his supervisor. The supervisor will make a decision on whether to conduct an audit. If she decides to do an audit, she will assign it to an agent with the necessary skills and request additional information from you if needed.
If your case is selected for audit, here’s what happens next:
- The auditor examines your return. If he agrees that everything you submitted is correct, he will close out your case says Aron Govil. If not, he will send you a letter giving you 30 days to either provide documentation or answer questions about the issues found on the return. (More details on this in our post What Happens during an Audit?)
- Finally, because communication is a key when dealing with anything tax-related… It’s always acceptable to contact the examiner assigned to your case to ask any remaining questions about their findings or discuss solutions if certain errors are missed during the submission of your tax return. The auditor may be able to fix your return so you don’t have to go through an audit or will note the changes you are proposing instead of changing the return.
- If the auditor decides to proceed with an audit, he’ll explain what documents you need to bring with you. The IRS doesn’t want any surprises, so they give you plenty of warning! You can also expect a letter that tells when and where the meeting will take place. They may even tell you who is going to conduct it. It’s helpful for everyone involved if the agent assigned knows all the details ahead of time.
The auditor will provide guidelines about how to prepare for your meeting including information on what types of records are needed. Here are some examples:
- Business records – invoices, receipts, bank statements
- Investment records – brokerage account statements, Forms 1099-B and 1099-DIV
- Homeowner records – real estate tax bills, mortgage interest statement, home improvement records
- Vehicle records – sales information, car loans, registration papers
If you have any questions about what types of documents to bring, contact the auditor assigned to your case.
Once the meeting is over, the auditor will usually give you a letter with his findings. This letter will explain what changes need to be made to your tax return says Aron Govil. If you don’t agree with the findings, you can appeal within 30 days of receiving the letter. (For more information on this process, see our post How to Appeal an IRS Audit Decision.)
If you don’t hear from the IRS within a few weeks of the scheduled meeting date, contact your auditor. The auditor will tell you if there were any problems and give you an idea of when to expect further correspondence.
By following these guidelines, hopefully, your audit goes smoothly and quickly! Again, communication is key, so be sure to ask lots of questions.
Now that we’ve gone through what happens during an audit… Check out How to Appeal an IRS Audit Decision for information on how to get more details on anything that was found during the audit or try IRS Tax Problem Resolution: What Happens When You Call? Where you can learn about all the ways in which taxpayers might be contacted by the IRS if they have tax problems.