The information in this article is up to date through tax year 2019 (taxes filed in 2020).
Why am I being audited?
If you’re being audited, it does not automatically mean you did something wrong. You can be selected at random. More frequently, taxpayers are audited because of suspicious activity (e.g., entry errors, unreported income, etc.) or if they are associated with another taxpayer whose returns were selected for audit (e.g., if there were inconsistencies between your taxes and a corporation’s taxes that you are affiliated with).
How do I know if I’m being audited?
You will be notified by mail if the IRS selects your account for audit. The letter will provide contact information and detailed instructions. They will never call or email you with without first notifying you by mail. Do not provide personal information until you are sure it is legitimately the IRS contacting you. For more details about avoiding fraud, read IRS Scams: 5 Signs You Are Being Scammed.
What do I need to show for an audit?
The IRS will request specific documents in the letter. You are legally required to keep all the records you use to prepare your tax returns for at least three years from the date you file a return. This is because the IRS can audit returns filed within the last three years, and you must be able to present documentation. They may review additional years if a substantial error is found. We advise holding onto records within the past eight years so you can provide anything that may be requested. Six years is typically the maximum time frame the IRS will investigate.
What happens in an audit?
The IRS will review your records either by mail or through in-person interviews. Interviews can take place at the IRS office (office audit) or your home (field audit). If conducted by mail, additional information about specific items on your return may be requested. If you have too many records to mail, you can request an in-person interview.
How long does an audit take?
Several factors determine how long an audit takes. The type of audit, complexity of the issues, availability of information requested, schedule availability of both parties, and your agreement or disagreement with the findings will affect the speed of the process.
What happens after an audit?
Audits typically end up one of three ways.
- The IRS can find that no change is necessary if you have substantiated all the items under review.
- If the IRS proposes changes, you can agree or disagree with those changes. If agreed, you will be asked to sign a specific form, depending on the type of audit conducted, and you will be instructed how to pay if money is owed.
- If you disagree with the proposed changes, you can request a conference with an IRS manager, contact an appeals officer offered by the IRS for mediation, or file an appeal by submitting a formal written protest.
For ways to reduce your risk of being audited, read 4 Things You Can Do to Lower Your Audit Risk.