One of the worst fears of any taxpayer is to receive a notice from the IRS that they are being audited. But having an audit done doesn’t necessarily mean you did something wrong. Plus, only a fraction of taxpayers are chosen for audits each year. For example, in 2022, the IRS audited about four income tax returns out of 1,000.
That said, if you do receive an audit notification, you can take several essential steps to ensure that your audit goes smoothly. The best thing you can do is understand the process and take proactive steps to prepare.
Here is what to do if the IRS audits you.
What Happens When You Get Audited by the IRS?
First things first, don’t panic! It is vital that you understand the audit process and prepare for it.
The most common type of IRS audit is a “correspondence audit,” which means most of the process is done via mail. The IRS will send you a letter detailing why they are auditing you, and you must respond within the time frame specified in the letter.
You may need to provide additional documentation or information to support your tax returns. In addition, the IRS can audit your tax returns for up to multiple years, so be sure to keep records of your tax returns from prior years.
Once you have responded to the audit letter, the IRS will review your response and any additional documentation you provided. They may then send you a letter with their findings or contact you for further information.