Understanding IRS Audits – A Guide to Preparation and Potential Outcomes

Anyone can get scared when they get an audit letter from the IRS. It can be scary to think that the government will be looking at your funds. Do not worry, though! 

You can confidently go through this new territory if you have a good idea of the process and do some simple planning ahead of time. You can get help with this from a CPA in Seattle, WA. 

Understanding IRS audit types and initial contact.

The IRS usually starts talking to people by sending them a letter. This first notice will tell you what kind of audit you will be getting and what papers you need to get ready. 

Do not worry! Before you read the letter, take a deep breath. It is very important to know what kind of audit you are facing.

The IRS checks for three main types of things:

• Correspondence Audit: The easiest type of audit is a correspondence audit, which generally finds a small mistake or missing information. The IRS will request more proof of your identity through the mail to make sure your tax return is correct.
• Office Audit: You will be asked to meet with an auditor in person at an IRS office. Here, they will look over certain parts of your tax return and ask for proof.
• Field Audit: This is the most thorough audit. An IRS agent comes to your home, business, or accountant’s office to look over all of your records in great detail.

Figuring out what kind of audit it is can help you figure out how well you need to prepare. 

Organize your records for a stress-free IRS audit.

Being prepared is key to a smooth IRS audit. Get together all the papers that were stated in the letter of notice. 

These could be things like tax returns, payments, business records, and proof of expenses. It is kind of like making a case: the more proof you have, the better your case is.

If you are not sure what paperwork you need, do not be afraid to ask a tax expert. They can help you figure out what you need to do in your particular case. Do not forget that getting some help from a professional can save you a lot of time and trouble. 

The audit interview. 

The audit interview, whether it is at the IRS office or at your own table, is your chance to talk about your money. Remember these important things:

• Keep your cool and be polite. The inspector for the IRS is just doing their job. Being polite goes a long way toward starting a good conversation.
• Tell the truth and be honest. When asked questions, be honest and do the best you can. Do not guess or make assumptions.
• Bring your papers with you. Make sure the inspector can easily access all the paperwork they need to look over. This helps speed up the process and shows that you are ready.
• Write things down. Write down what was said and any questions you have. This can be useful if there are later questions or problems.

Do not be afraid to ask for help or a break if you feel stressed out during the interview. Taking your time will help you give the correct information. 

The potential outcomes of an audit.

After looking over your papers and taking notes, the IRS will decide what to do with your tax return. There may be no changes, more tax to pay, or a refund if the audit shows you paid too much. 

Your tax report stays the same if no mistakes are found. You can talk to the IRS about a payment plan if you owe more tax. 

Do not forget that the audit process is not always set in stone. You can talk things out with the inspector or, if necessary, go to the IRS and appeal their decision. At this point, talking to a tax expert can be very helpful.