Don’t panic! Even though you’ve been issued an IRS audit letter, it’s not the end of the world. Less than 1% of all tax returns are selected for an IRS audit and that percentage is even smaller for those who make less than $100K. However, anyone can be selected for an IRS audit—no matter what their income is. If the IRS sees enough red flags in your return, you may be chosen to audit. For example, if someone earning $80,000 in a year claims $40,000 in charitable donations, the IRS’ computers could flag that account for a potential audit. As long as you are honest on your returns, audits can be handled with relative ease. However, if you were dishonest on your return—either by mistake or intention—you might receive a notice CP2000 or be in some more complex trouble. You’re not alone; the chart below details the amount of IRS audits implemented on individual tax returns for past years.

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No matter what your situation may be, you should contact a tax professional as soon as you receive an IRS audit letter.

How Does the IRS Notify You of an Audit?

The IRS always issues an audit via mail. The IRS will never notify you of an audit through a phone call or email.

Fraudsters will try and use an IRS audit to steal your personal information, like your bank account details and your Social Security number. Through email or a phone call, they’ll claim to be an IRS representative. Usually, they’ll use intimidating or aggressive language (like the threat of jail time) to coerce you into quickly providing them with your personal information or making a payment to them. This is not how the IRS handles tax audits. Contact your local IRS office or a tax professional if you want to verify the legitimacy of an audit notice.

Know that a legitimate IRS audit letter will provide information—not ask for information. An IRS letter will typically include your name, address, and Social Security number. Read our tips on how to tell a fake IRS letter from a real one.

Possible Audit Triggers

Why are you being audited by the IRS? Here are some common triggers:

  • Failure to report income
  • A large number of itemized deductions (that may look excessive)
  • When business deductions are claimed as personal deductions, and vice versa
  • When your income doesn’t appear to support your lifestyle
  • Unreported foreign accounts
  • Claiming children who aren’t the taxpayer’s dependents

Remember, your tax return must accurately reflect your income during the year. If there’s anything about your tax return that gives the appearance you’re not accurately reporting your income or deductions, you could be subject to audit.

It’s important to remember that not all of these triggers may be intentional. Filing taxes is a complicated process and it’s easy to make a mistake or two that could lead to a tax audit. Also know that audits may happen at random. The IRS randomly selects a small portion of taxpayers for audit each year.

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Sample IRS Audit Letters: What to Look For

The IRS is clear and concise in its letters and notifications. An IRS audit letter is certified mail that will clearly identify your name, taxpayer ID, form number, employee ID number, and contact information. For example, the first line of text might say, “We have selected your (state or federal) income tax return for the year shown above for examination”. The IRS will also explain the primary focus of the meeting and what you need to provide in order to resolve it within four sections of the letter:

  • Why the information document request is important

    This section simply explains why it’s important to bring the documents that the IRS has requested.

  • What to expect in the examination

    The IRS will notify you how long your meeting will last (typically 3 hours) and explain their wish to complete the entire process in the time allotted—this is contingent on the documents you provide and whether or not you were selected for a non-correspondence audit.

  • Who may come to the examination

    If you filed a joint return, you and or your spouse may attend. You may also have someone represent you at the meeting; if you plan on not attending with your representative, a power of attorney form must be filed.

  • What will happen if you do not respond

    The IRS will issue a report showing additional tax due so it’s in your best interest to call and schedule an appointment as soon as possible.

Finally, the letter will be signed by the examination officer who has been assigned to your case and wrote your audit letter. An IRS letter (certified mail) will clearly tell you exactly what information they are looking for.

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How to Create an Audit Response Letter

Your actions before, during, and after your IRS audit will determine your compliance with the government. Respond as soon as possible with either a phone call or an audit response letter—you will have 30 days to do so without a penalty. If you choose to write an audit response letter, here are some tips.

  • Include the following: Tax ID number, full name, contact information, employee ID, business ID (if applicable), and the name of the IRS officer who is in charge of your case.
  • Address each finding issue that the IRS stated in your audit letter.
  • Provide any and all related documentation attached to your letter.
  • Request a time and date to meet and resolve the finding issues.

The best thing to do when receiving an IRS audit letter (by certified mail) is to contact a tax professional. A CPA or tax attorney will know exactly how to handle your unique circumstances and reasons for the audit. These response letters need to be flawless; if done correctly, they can resolve an audit quickly and stress-free.

How to Create an Audit Response Letter

Your actions before, during, and after your IRS audit will determine your compliance with the government. Respond as soon as possible with either a phone call or an audit response letter—you will have 30 days to do so without a penalty. If you choose to write an audit response letter, here are some tips.

  • Include the following:
    • Tax ID number
    • Full name
    • Contact information
    • Employee ID
    • Business ID (if applicable)
    • Name of the IRS officer who is in charge of your case
  • Address each finding issue that the IRS stated in your audit letter.
  • Provide any and all related documentation attached to your letter.
  • Request a time and date to meet and resolve the finding issues.

If the IRS audit is questioning some of your income, expenses, or deductions, you should gather your receipts and bank account statements so you can argue your case. You can still make it through an audit without your receipts, but you should enlist a tax professional to help you prove your financial integrity.

The best thing to do when receiving an IRS audit letter (by certified mail) is to contact a tax professional. A CPA or tax attorney will know exactly how to handle your unique circumstances and reasons for the audit. These response letters need to be flawless; if done correctly, they can resolve an audit quickly and stress-free.

How Long Does it Take to Get Audited?

The auditing process can vary from case to case. The typical audit will last 3 months—allowing for four weeks of planning, four weeks of field work, and four weeks of compiling the audit report. However, large corporate cases may take a significantly longer amount of time. The following are variables may extend the length of your audit:

  • Current tax agency backlog
  • The nature of your audit (what the IRS has taken issue with on a return or another matter)
  • The type of audit
  • Appeal (you can appeal the results of your audit thus increasing the amount of time it will take to complete the entire process)

Keep in mind also that the IRS has up to three years to audit your tax return.

How to Get Through an IRS Audit

Don’t panic if you’ve been audited. An IRS audit letter may initially give you fearful emotions that evoke thoughts of jail time or financial ruin, but that’s far from the case. Most IRS audits are resolved cordially. But it’s important that you promptly reply to your audit letter. Don’t hesitate to call a tax professional if you need assistance preparing your response letter. Replying to the IRS before the deadline is one of the best ways to help your case.

If you do owe tax money to the IRS, a tax professional can usually help you negotiate an installment agreement so you can pay your taxes in small, affordable increments. It’s possible that the IRS may even forgive some of your debt. They know that it’s better to collect some money than no money at all. But you can only negotiate these solutions if you reply to your IRS audit letter as soon as possible and do everything that the letter requests. Failure to comply with IRS instructions may lead to severe financial penalties or tax liens.

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