4 key steps to take (instead of flipping out).
It’s a phone call or letter that may fill you with dread: a notice that a personal or business tax return you submitted is being audited by the IRS. While your chances of receiving one are the lowest in a decade due to decreased IRS manpower and funding (according to USAToday), here’s what to do if Uncle Sam reaches out to you:
- Confirm it’s real: The IRS says they never send an audit notice by email, only by phone or letter. To confirm if the letter or call is valid, contact the IRS customer service line at 1-800-829-4933; you can then contact the IRS employee who contacted you to provide the required information. A phone call should be followed up by a formal letter. Additionally, if you receive an electronic audit communication, be sure to call the service line to report it — you could be a target of identity thieves or scammers.
- Find out why you’ve been audited: Check the upper right corner of the letter for a number that corresponds to a reason you’ve been audited. Some common reasons for audits, according to Rocket Lawyer, include:
- The IRS found information on your return that doesn’t match up with your tax forms (such as a W-2).
- An automatic computer program flagged your return, for reasons such as having withholding that exceeds the national average.
- You’ve simply been selected at random.
- Identify how you’ll be audited: The IRS defines the three types of audits as:
- Correspondence audits: You can mail them the requested documents (the most common audit).
- Field audits: An examiner comes to your home or business.
- Office audits: Held at a local IRS office.
For field and office audits, you must present the requested documentation in person, and you may especially wish to have a professional tax advisor with you to help you with the audit.
- Gather your documentation: You have 30 days to respond to an audit notice. Investopedia provides detailed guidance on the kinds of documentation you’ll need, depending on the issue the IRS is raising. Do you have what was requested? As a rule of thumb, the IRS recommends you keep your tax returns and supporting documents for at least three years (longer in several instances), the same general time frame the IRS can audit you after you file. (Note that the IRS can go back six years in some cases, or forever if you fail to file a return!) Be sure to submit copies, not originals, to the IRS.
Be sure to access the IRS’ video series, Your Guide to an IRS Audit, a comprehensive look at what to expect every step of the way.