Am I in Trouble if I Receive an IRS Audit Notice?

Use these links to jump to different sections:

• Are You in Legal Trouble if You’re Audited?
• How the IRS Notifies You of an Audit
• What to Do if You Get an IRS Audit
• Find Experienced Legal Help

It’s a nightmare for every taxpayer: An audit by the Internal Revenue Service (IRS). Audits are frustrating, complicated, and stressful. No one wants to deal with them. The good news, however, is that they are somewhat less common than many people realize, totaling less than one percent of all federal tax returns filed in the United States.

As uncommon as they may be, most people still fear that an audit means they’re in trouble. Just because you are facing an income tax audit, though, it does not necessarily mean you did anything wrong.

Are You in Legal Trouble if You’re Audited?

Often, the fear surrounding an IRS audit is worse than the audit itself. Most audit selections are done by a computer program using a formula that detects tax return entries that seem unusual or unlikely. Sometimes, selections are entirely at random. Then an IRS agent reviews the return to make the final determination on whether to audit.

Many audits are minor. For example, you may face an audit because the IRS office received “mismatched information.” Such mismatches are often easily resolved once the IRS requests and receives additional tax information from you.

Red flags that can trigger an audit on individual tax returns include incorrectly reported income and inappropriately claimed tax credits or tax deductions; for business taxes, claiming excessive business expenses.

How the IRS Notifies You of an Audit

If you are being audited, you should expect to receive a notice indicating that fact, including the type of audit. As explained by the IRS, audit notifications are submitted by mail. You will not receive notice of an IRS audit over the phone. If you do, you are likely dealing with a scam. In fact, the majority of audits are conducted entirely through the mail (known as correspondence audits).

Some business owners or higher-income taxpayers may be subject to either an in-person office audit held at a regional IRS office or a field audit, in which an IRS agent visits you at your home or place of business. Either way, you should receive a written notification before an IRS auditor visits you.

What to Do if You Get an IRS Audit

Here are some steps to take if you’ve received an IRS audit notice in the mail.

1. Organize Financial Documents and Records

Well-organized documentation is one of the keys to successfully—and painlessly—resolving an IRS tax audit. If you receive an IRS letter, you should take immediate action and readily comply with the IRS’s requests.

After reading the audit letter and assessing the situation, your next step should be to gather all relevant financial documents and financial records for the tax year. Double-check that your information is correct so as not to create further complications. The more information that you have in your possession, the better off you will be.

2. Get a Tax Professional’s Guidance

Finally, taxpayers should always be ready to seek professional support. Dealing with an IRS audit process can be deeply stressful. You do not have to go through this process by yourself. An experienced tax professional—CPA or tax attorney—can review the audit notice and all of your available financial records and help you take the appropriate steps to protect your rights and interests.

Find Experienced Legal Help

If you or your business is facing an audit from the IRS or other tax liability issues, you should not hesitate to contact an experienced tax attorney. A tax attorney can discuss your options for resolving tax issues, such as payment plans for back taxes, or formulate your audit defense. Visit the Super Lawyers directory to find an experienced tax attorney in your area. To learn more about this area of tax law, see our tax overview.