IRS collection efforts are often aggressive, and with the agency expecting more collections than ever this season, individuals and businesses must be prepared for a potential IRS audit. Proactive preparation also allows filers to present a well-prepared response, demonstrating transparency and cooperation with the IRS and expediting the overall audit process. Nevertheless, it’s crucial to retain professional assistance when corresponding with the agency to protect financial interests and minimize the likelihood of additional taxes or penalties.
How Will the IRS Contact You?
IRS audits don’t always point to a problem with tax returns. Sometimes, filers are selected based exclusively on an internal algorithm that maintains the agency’s statistical “norms” to corroborate or update selection information. Regardless of how the IRS chooses an individual or business to audit, the agency sends a notice by mail—typically called a certified audit letter.
Official IRS audit letters will have the IRS logo, unique identification numbers, a clear explanation of the purpose of the communication, agency contact information, compliance deadlines, and requests for specific documentation. The timeframe for replying to and preparing for an audit can vary, but generally, filers will be given at least 30 days to respond.
How Do You Prepare for an IRS Audit?
It’s critical that filers respond within the allotted timeframe and include all required documentation. Each situation is unique, but individuals and businesses must gather relevant financial information, which may include corresponding with various institutions. Filers will also draft a response letter outlining the documentation therein and addressing any discrepancies, if applicable. Ignoring or delaying a response to an IRS audit may lead to further complications, including penalties.
Remember that the exact timeline for your need to respond and the audit process moving forward will depend on the complexity of the return, among other factors. But one thing remains certain in any situation. If you receive an audit notice, consulting with an experienced tax professional who understands how IRS audits are conducted and can correspond effectively to give you peace of mind is wise. Contact the Highland Tax Group today to get started.