As an adult responsible for filing and paying your own taxes, the word audit might send a shiver down your spine. After all, an audit usually only occurs if the Internal Revenue Service (IRS) has reason to believe that there are omissions or errors in your tax return. Conflicting tax documents or unreported income can be common sources of issues.
Audits can sometimes lead to financial repercussions for individuals. In certain cases, an audit that finds that someone substantially under-reported and underpaid their taxes could even result in criminal charges. Still, despite the potential complications that an audit can represent, receiving notice that the IRS intends to audit you should not be a reason for you to panic.
People who experience an audit can come out successful without penalties if they have the right help. The more you know about the different ways that an audit can take place, the more comfortable you’ll be with going through the process.
Many audits are done through the mail
The correspondence audit is arguably the most common form of audit. The IRS will send a letter, and the taxpayer can then send documentation and records into the IRS. Although substantial research is often necessary as part of a correspondence audit, an audit through the mail is arguably the least stressful form, as it doesn’t involve any kind of in-person interview.
Sometimes, you have to go into an IRS facility for an audit
In-person interviews that take place at an IRS office can be necessary for particularly complex or unusual tax situations. An in-person audit isn’t necessarily indicative of a likely negative outcome, just of a need for detail and understanding. A person physically going to an audit has the right to bring an attorney to advocate for them during the meeting.
Businesses can undergo a field audit
If you run a small business and the business, not you as an individual, winds up audited, the IRS may send a field representative to the business to review records and perform an audit. In that scenario, the entire audit process could occur at your facility, instead of an IRS office.
Any audit will require a careful review of your records and may necessitate advocating for yourself in order to avoid penalties.