You filed your taxes, and you feel confident in your calculations. Then, you receive the dreaded letter in the mail from the IRS. You’re being audited.
An audit is a fearful process. You’re left wondering how long the process will take and whether you still have all the information you need to provide. Let’s face it, we’re supposed to keep tax documentation for several years, but many of us don’t. Or, if we do, our filing system isn’t the best it could be, and we can’t find anything when needed.
Statute of Limitations
The first thing you should do is relax. While the audit process seems scary, there are some things you should know going forward that will help to ease your mind a little.
Here’s the first bit of good news. There is a statute of limitations that the IRS must abide by when auditing your tax returns. That means that they have a time limit for how long they can add tax fees to the return they are auditing.
The statute of limitations lasts for three years from the later of the due date of your tax return or the date you filed the return. For example, if you are being audited for the 2020 tax return and filed in March, the statute of limitations began when the return was due on April 15, 2020. That statute of limitations would end on April 15, 2023.
Of course, there are some exceptions to the statute of limitations. For example, there is no statute of limitations in cases where fraud is involved, which is rare. For cases with large amounts of income that went unreported, the statute is extended to six years. However, the IRS typically works to have the audit completed within the three-year initial period.
How Are Audits Conducted?
Usually, audits are conducted in one of two ways. The IRS either manages audits by mail or through in-person interviews. If you are scheduled for an in-person interview, you will meet with the auditor in one of four places.
- At the IRS office, which is known as an office audit
- At your home
- At your place of business
- At an accountant’s office, which is called a field audit
The IRS will initially contact you via mail, and they will give you instructions and contact information in that letter. If they perform an audit by mail, your initial letter will request additional information about specific items on your return. If your records are too large to mail back, you can request an in-person interview.
Mail audits are usually the fastest, with you being notified within seven months of filing and the audit being completed in three to six months. Office audits typically begin within a year of filing. They are usually complete within three to six months, provided you bring all the information needed and no other issues are discovered. Field audits take the longest and can last a year or longer because these audits are typically saved for the most complex tax situations.
Technology Can Speed the Process
As technology advances, so do the methods used in the auditing process. Using technology speeds up the process while also making it more efficient. The use of technology helps streamline data collection and provides auditors more flexibility with their workflow. Adopting the available technology allows for quicker audits using less of the workforce.
An audit can be a scary thought. While the statute of limitations for an audit is three years, the IRS works to complete the process within a year, if not sooner. If you are being audited, a qualified tax attorney from Guardian Tax Law might be able to help you through the process. Contact them today to learn your rights and responsibilities.