An audit will typically mean a careful review of your financial records and tax return filings. If there are serious issues, the Internal Revenue Service (IRS) could determine you owe unpaid taxes, and they could even pursue criminal charges in extreme cases.
Audits are sometimes random and performed just to validate the accuracy of a return, but less than 1% of tax returns face this level of scrutiny each year. When the IRS notices potential issues with your tax return or discrepancies between what you file and what employers and financial institutions file, they may decide to audit you.
What happens when you face an audit?
Receiving a letter notifying you of a potential upcoming audit can be a terrifying experience. You might immediately start imagining the worst-case scenario that involves some kind of huge and unintentional mistake on your part leading to massive penalties.
You might worry about attending a meeting where you have to answer multiple rapid-fire questions about your finances and think about how you could make mistakes. What you may not realize is that not every audit involves an in-person meeting. After all, the resolution of the discrepancy, rather than a face-to-face conversation, is typically the goal of an audit.
The IRS resolves some audits through the mail
Depending on the issue that led to the audit, you may be able to provide records to the IRS via written communication and resolve the matter without ever attending a hearing. You could file a 1040-X amending your tax return because you made a mistake and provide financial records that help clarify certain figures on your tax return.
Typically, the IRS will indicate in the paperwork whether you have to go in for a meeting or if you can submit evidence with a letter.
What if you must attend a meeting?
If an in-person audit is in your immediate future, the good news is that you don’t have to go alone. You have the right to bring an attorney to speak on your behalf, so you don’t have to worry about nerves or mistakes impacting your situation. Understanding how the audit process works can help those dealing with a tax controversy or upcoming IRS audit resolve the matter as quickly and effectively as possible.