If the IRS advises you that your tax return has been selected for an audit, I am sure you will have a swell of questions come flooding into your mind.
Here are the commonly asked questions regarding an IRS audit.
Why me?
A short question, but easily the most frequently asked. First of all, know that the IRS selection of your tax return does not mean that there is an error on the return. Many returns are selected by a random sampling.
Your return could also be selected because a certain expense, deduction or credit that you have claimed is outside the average parameters established by the IRS. This means that something you claimed is unusually high or low, and requires substantiation.
Likely, your return was pulled because of unreported income. The IRS uses a document matching system to align the income reported on your return with the income reported by all of your payers. If income from a W-2 or a Form 1099 was left off of your return, this system will catch it and you will be taxed on the difference, plus any applicable penalties or interest.
Does the IRS use email to advise me of an audit?
No. The IRS has seen an increase in fraudulent emails that purport to be legitimate. These emails may look very much like official government communication. The IRS never uses email to make contact with taxpayers.
If you receive an email that claims to be from the IRS, forward it to phishing@irs.gov. Do not click on any of the links in the email.
Does the IRS select amended tax returns for an audit?
Yes they do. If you amend your tax return by filing a Form 1040-X, this return can be selected for an audit in the same way as an original filing.
If I am audited once, does this mean I am likely to be audited again?
The general answer to this would be no. A taxpayer who goes through a random or systemic audit is not "flagged" or prejudiced against for future audits.
That said, in some cases, a taxpayer's future returns are required to be pulled for additional examination. For example, this would be the case for certain credits that were erroneously claimed, for fraudulent claims, or for gross misstatements of income or severely bloated business expenses.
Where will my audit take place?
Possibly, nowhere. Most audits are done via correspondence only.
If you need to meet with an IRS agent, you will be provided with a date and time. The meeting will be at your residence, your place of business, or at your local IRS office.
Can I change the location for my audit?
You can request this, but it will be up to the IRS. Absent good cause, the location will remain the same. In some situations, the IRS wants to meet with you in your place of business, where your business records are likely held.
Who reviews my audit to make sure it's correct?
You do. If you do not understand something, ask. It's important to the IRS that you have a full understanding of why you owe, both for the sake of making repayment, and so that you do not commit the same error in the future. At times, the Examiner's or Agent's Manager will also review the findings.
I can't make my appointment. Now what?
Don't ever blow off a meeting. That should be common sense, but it occurs quite often. Contact the IRS agent assigned to your account and explain your situation. If your first appointment is pushed back more than 45 days after the audit is open, an IRS Manager needs to approve the meeting.
How far back can the IRS go for an audit?
This depends on the type of audit. For general unreported income that surfaces through the document matching program, the IRS typically has three years.
Substantial errors and omissions can go back as far as six years.
Can I appeal my audit?
Absolutely. At the time the audit is closed, if you still disagree, you can request to exercise your appeal rights, which the auditor would have reviewed with you, likely at the very outset of your audit.
You can also request that the IRS reopen a closed audit. This would be done only if you have additional significant information to present that you did not have at the time of the audit.
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