What Do You Do When an IRS Audit Letter Arrives?
The chance of an IRS Audit letter landing in your mailbox is pretty slim. If you earn $200,000 or less a year, you have about a 1% chance of being audited.
If you make $1 million or more, your chance of being audited rises to about 7.5%.
That being said, if you receive one, it can feel like the IRS is singling you out. So, if you do find one in your mailbox…
As you stare at that envelope, keep this in mind. Even the IRS will remind you – selection for an audit does not automatically mean they found a problem with your return.
In fact, automation is the key here. A computer may choose a return based on a statistical formula. Or, it may just be a random selection for an audit.
In other cases, if someone you do business with or have had some kind of financial transaction with is being audited, it can bring your return into that process, as well.
Two Kinds of IRS Audits
There are two kinds of audits the IRS conducts:
- Correspondence audits, by mail requesting back-up documentation
- Field audits, initiated by a letter containing all contact information to schedule an in person interview.
The most common is the correspondence audit where you may be asked to produce receipts, bills, cancelled checks, etc., to substantiate a transaction. They might even ask you to fill out a questionnaire.
After reading the letter and getting a better idea of what type of audit they are initiating, stop and take a breath.
This is the best time to confer with your tax professional. Especially since your tax professional is probably more familiar with audit issues than you are.
I've seen a downward trend in audit letters over the last couple of years, but when one arrives in your mailbox, panic can set in. As a licensed IRS Enrolled Agent, I am authorized to represent my clients through correspondence and in person with the IRS. Even a seemingly simple correspondence audit can become complicated if the wrong documents are sent, or a questionnaire leaves out essential information. This is a good time to turn to a professional.
Who to Call When You Receive an IRS Audit Letter
Remember just because you received a letter, it doesn’t mean that you have to deal directly with the IRS. Corte Madera’s ProActive Tax Solutions can represent you. We handle all facets of dealing with the IRS. Don’t be intimidated by a letter you don’t understand. Schedule your free, no obligation meeting now.