If you receive a letter from the Internal Revenue Service (IRS) about a civil audit, you are not alone. Understanding the timeline and steps ahead can reduce anxiety and help you respond effectively to the audit.
The IRS is in the audit business. In the fiscal year 2021, the IRS closed 738,959 tax return exams. If you receive an audit letter this year, the chances are good your audit will be concluded in the next two years, depending on issues that arise.
The IRS does not use telephone or email to notify taxpayers of an audit. Given increased scam activity, it is important to understand the IRS will only alert you of an audit via the U.S. Postal Service.
The look-back period for an audit is usually three years, but can run six years in some circumstances. Ideally, the IRS initiates an audit relatively quickly after a tax return is filed, but with understaffing, it may not be the case. With no extenuating circumstances, facts, or evidence of a tax crime, the IRS typically concludes an audit in about 26 to 27 months after the filing of a tax return. Highly complex cases can take longer. For example, the tax audit of former President Donald Trump began in 2011 and was not concluded by 2020.
The timeline of an audit depends upon the type of audit being requested. A correspondence audit is conducted by mail. A correspondence audit usually takes less time than other types of audits, but can be drawn out as additional requests and documents go back and forth in the mail. In the fiscal year 2021, the IRS conducted almost 79 percent of its audits via mail, with the remaining audits taking place in the field.
Field audits occur in a regional office of the IRS or at the home or business of the taxpayer. Field audits are often more complex and will run longer than correspondence audits. It is not unusual for a field audit to last more than a year. Correspondence and field audits are conducted by examiners with differing levels of training based on the at-issue facts and business circumstances.
Your response to any kind of audit should be cautious and truthful. You have the right to representation during an in-person IRS interview. With complicated issues or those that border on tax fraud, consider working with an experienced IRS tax attorney to ensure your response is straightforward and clear to the examiner.
Hope we don’t need to mention this, but — never attempt to bribe an IRS examiner or hint at bribery. Examiners must immediately report the attempt and it will not help your situation.
When you receive an audit letter, speak with a tax attorney accustomed to working with the IRS if you have a complicated or questionable return. It could reduce your tax liability — and your anxiety — in the long run.
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From offices in Chicago and Cleveland, the tax attorneys at Robert J. Fedor, Esq., LLC help individuals and entities nationwide respond to correspondence from the IRS and other tax controversies. When you need trusted tax advice locally or abroad, contact us or call 800-579-0997.