IRS audit

What really happens in an IRS audit

The chances of being audited by the Internal Revenue Service (IRS) are really very low. In Globe Live Media we tell you about the process.

Just hearing the word “audit” can cause anxiety, especially when it comes to the Internal Revenue Service (IRS). The reality is that the actual process the tax organization goes through for some taxpayers can be far from what you might think.

Who gets audited?

The first truth is that the chances of a taxpayer in the United States going through an audit process are very low. During tax year 2022, the Internal Revenue Service audited 3.8 out of every 100 tax returns, which translates to 0.38% of all tax documents submitted during that year. This, compared to 0.41% that were audited in 2021.

According to the IRS, some taxpayers are also sometimes selected at random. “We compare your tax return to ‘normal limits’ for similar returns. We develop these by auditing a statistically significant, randomly selected sample as part of IRS projects conducted by the National Research Program. The IRS uses this program to update the information used to select returns,” the tax agency explains on its website.

How the IRS selects the people it will audit

The tax agency uses software that assigns a certain score to tax returns. If the score is too high, then the IRS marks those forms as ready for review or audit, Michael Prienzo, managing director of tax at CliftonLarsonAllen, told CNBC.

What an audit summons looks like

If what you imagine is that you have to go to a courthouse type or make several visits to IRS offices in front of inspectors, you’re wrong. Most audits performed by the Internal Revenue Service are done by mail. That is, you will get a communication telling you that they are requesting certain extra documents in order to continue processing your tax return.

Once you receive the tax notice, you have 30 days to respond. According to research from Syracuse University, 85% of audits in 2022 were conducted by mail during the 2022 tax year. In the unlikely event that you are asked to answer a rigorous examination in person, if you have the support of a tax preparer, he or she can help you change the location so that you can complete it in his or her office.

How do I know if the IRS got my answer?

Whichever delivery service you use, you should always ask for confirmation that the IRS has received what you sent.