It happened. You got the letter you have been hoping to avoid. The Internal Revenue Service has picked you for an audit. Now what?
Even if you are certain that you have done everything right on your taxes, audits happen. If you have never been through an audit before, it can be a frightening thing — as is true for just about anything that is new. Whether you reside in New York or elsewhere, there is some basic information about audits that you need to know that could help you as you go through the process.
If you received a letter from the IRS stating that you are being audited, it means one of two things: there is a potential issue on your tax form that the IRS feels needs further review or you were randomly selected. If no issues are ultimately found, the audit will quickly be closed. If there is an issue, however, it could result in you paying more in taxes plus fines and interest.
How does an audit work?
In the notice you receive there will be instructions about what you need to do and contact information to the auditor handling your case. If your audit is being done by mail, your notice should provide information about what documents you need to send in for review, as well as give a deadline as to when the required documentation needs to be sent. For an in-person audit, your letter will include a list of documents needed for review and provide information about how to schedule an interview.
After the gathering of all of your information is complete, an examining team will review it, looking for any problems. Those findings will then go to your auditor who will check everything again and then make a final decision in your case.
There is no set time frame as to how long this process may take. Every case is different.
Closing your case
There are three ways to conclude an audit. These are:
- No change: No issues found that require the payment of further taxes and penalties
- Agreed: Problem identified, changes proposed and you agree to make the necessary payments
- Disagree: Issue identified, you disagree with the proposed changes
Audits that result in no change or an agreement of new terms will take little time to close. If you disagree, however, you will have the opportunity to file an appeal in order to have your case reviewed again.
Do I have to go through this alone?
No. You are not required to go through it all alone. You may have legal representation step in to help you.
Do not let this type of investigation scare you. Knowledge is power, so you should get your questions answered before you get too far along in the audit process.