Read on to learn what you should do if you get an IRS letter, what important information may be in your IRS audit letter, and how a tax professional can help if you’ve received an IRS letter. On this page, we’ll also cover some general information about IRS audits to help you understand why you may have received an IRS letter, what type of audit you may be experiencing, and how long the audit process can take.
WHAT SHOULD YOU DO IF YOU GET AN IRS AUDIT LETTER?
If you receive a letter stating that you’re being audited by the IRS, you should take immediate action. It’s very important that you respond to this letter in order to comply with the IRS and avoid strict IRS actions or penalties. IRS audit letters are also known as 30 day letters, since you have 30 days to respond to an IRS audit letter, so always respond within this timeline. You can either respond to the IRS by phone call, send the IRS an audit response letter, or have a tax professional respond to the IRS on your behalf.
If you’ve received an audit notice, we generally recommend contacting a tax professional, like a tax attorney, an IRS enrolled agent, a licensed CPA, or your tax preparer. A tax expert such as a tax attorney will be able to determine why you’re being audited and will understand the ideal response strategy for your unique situation. A tax attorney can represent you on your behalf to resolve your audit and can represent you in tax court if necessary.
Speak to a tax expert about IRS Audit Letters. Contact us now!
WHAT’S IN AN IRS AUDIT LETTER?
All IRS letters and IRS notices have a clear, standardized format, including audit letters. An audit letter will arrive at your home or place of business by certified mail. The letter will include your name, your taxpayer ID (for individuals, this is your social security number), the form number, and contact information (such as a phone number). The beginning of an IRS audit letter will state that your income tax return for a specified year has been selected for examination. Then, there will be four sections within the letter with more information, which will include the following:
- A section that details what documents or additional information the IRS needs from you.
- A section that explains what you should expect during your meeting with the IRS discussing your audit.
- A section that will let you know who you can bring to your meeting, which can include your spouse (for jointly filed returns) or your tax attorney. If you would like to send a tax attorney to your meeting in your place, you must file a power of attorney form.
- A section that explains what will happen if you do not respond to your IRS audit notice.
At the end of your letter, you’ll see the signature of the IRS agent assigned to your case.
WHY DOES THE IRS CONDUCT TAX AUDITS?
The IRS uses tax audits to ensure tax law compliance. The tax audit process is in place to ensure that taxpayers report their tax information correctly and pay their correct tax balance.
The IRS conducts many random audits, so you may be audited even if all the information on your income tax return is correct, you have paid your full tax liability, and you owe no additional tax. Then, the IRS also conducts tax audits when they notice red flags on an individual, small business, or corporate tax return. The IRS may suspect that someone claimed tax credits that they were not entitled to (like the earned income credit) to get a larger tax refund or they may notice inconsistencies across a tax return. If the IRS found red flags in a person or business’s tax return, they may request information to verify tax return or Schedule C information, such as bank account information or other documents.
TYPE OF AUDIT: CORRESPONDENCE AUDITS VS. FIELD AUDITS VS. OFFICE AUDITS
There are three different types of audits IRS employees may conduct: correspondence audits, field audits, and office audits.
- Correspondence Audits: This is the most common type of audit. Correspondence audits are when the IRS requests more information from you. This type of audit does not require meeting with an IRS agent in person.
- Field Audits: This type of audit involves a visit from an IRS employee. Field audits are most commonly done on businesses.
- Office Audit: Office audits require that you go to an IRS office to meet with an IRS agent in person.
If you’ve received an IRS audit letter, you will be able to tell which type of audit you’re experiencing from the information within the letter.
HOW LONG DOES THE AUDIT PROCESS TAKE?
The length of the audit process can vary widely depending on your unique circumstances. Typical audits take three months. However, more complicated cases (and complex corporate cases in particular) can take longer. IRS audits can vary in length depending on how busy the IRS is, your type of audit, your unique tax circumstances, and whether or not you choose to appeal your audit.