The IRS manages audits either by mail or through an in-person interview to review your records. The interview may be at an IRS office (office audit) or at the taxpayer’s home, place of business, or accountant’s office (field audit). Remember, you will be contacted initially by mail. The IRS will provide all contact information and instructions in the letter you will receive.
If the IRS conducts your audit by mail, the letter will request additional information about certain items shown on the tax return such as income, expenses, and itemized deductions. If you have too many books or records to mail, you can request a face-to-face audit. The IRS will provide contact information and instructions in the letter you receive.
Depending on the issues in your audit, IRS examiners may use one of the Audit Techniques Guides to assist them. These guides will give you an idea of what to expect.
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The IRS will usually audit a tax return within three years after the return was filed. You will receive a notice from the IRS explaining what items on your return the IRS is examining. The letter will tell you what documentation you need to provide and will say whether this is a mail audit (most audits for individuals are by mail) or an in-person audit. If the audit is to be in-person, a date for the first interview may be given, you may be asked to call to set up an interview time, or told that an auditor will call you to set up an interview.
For a mail audit, you will be given a date by which you should provide the requested documents. If you will be unable to respond by that date, call the number on your notice and request an extension.
Once you provide the requested documents, the auditor will review them and may request additional information if clarification is needed or if the documents you sent were not sufficient to prove that your return was accurate. Once the auditor completes the audit, he or she will send you an audit report (Form 4549) that details the proposed changes to your tax return, with any increase in tax, penalties, and interest. Rarely, the IRS will send a no-change letter that tells you the IRS has accepted your return as filed.
At the end of the audit, you can request a meeting – in most cases a phone interview – with the audit manager to disagree with the auditor’s proposed changes.
You will be given 30 days from the date on the audit report to appeal the proposed changes to your tax return. If you do not respond within 30 days or if your appeal is unsuccessful, you will be sent a statutory notice of deficiency. This notice gives you 90 days to file a petition with the U.S. Tax Court to dispute the changes to your return.
If you do not file a petition or you do not win your tax court case, the IRS will assess (record on your tax account) the taxes, penalties and interest and send you a bill for the balance due.
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