An IRS audit is generally one of the most unpleasant experiences in a person’s life. An Internal Revenue Service audit is their way of checking your tax return to make sure that it is valid. They will check and recheck everything in your return to make sure that you are properly claiming deductions and credits. Here are a few things to keep in mind when dealing with an audit.

Limit the Damage

When dealing with an IRS audit, the question isn't whether you will have to pay but how much. Less than 25% of the people that are involved in an audit get away with no changes to their tax return. This means that an overwhelming 75% people being audited have to pay more in taxes than their original tax bill suggested. This means your main concern should be to limit the damage instead of eliminating it. Do your best to make sure that everything is factual and as close as possible to reality. Therefore, you will need to do your homework and make sure that you are doing everything to the best of your ability. 

How Long Does It Take?

Audits are not something that you will usually be able to finish overnight. Audits from the IRS are a lengthy process that can take months. In fact, the IRS agent has a deadline of 28 months to complete your audit. This means that they can drag it out over two years if they want to. If you've been notified that you are being audited but you haven't heard from anyone in months, it might not be a bad thing. The agent that notified you might have been reassigned or left the IRS all together. This means that your file is sitting somewhere waiting to be picked up by another agent. If they do get around to finishing the audit, they might only have a short period of time to get it done because the 28 month clock is still ticking.

What Happens Next?

The auditor will go over all of the tax returns that are in question. They will ask for you to verify all of the items in question on your return. This means that you may be asked to supply receipts or show proof of certain deductions. If you deduct a home office, for example, they might want to see the office. The IRS agent will then file an audit report based on their findings. The report will list any changes in the returns and any difference in the amount owed to the IRS.

Once you get the report, you can do one of two things. You can pay the new amount owed or you can protest the report. If you pay the amount owed, the process is over and you can get back to your life. If you decide to protest the report, the process will drag on even longer. You will have to file an appeal with a different division of the IRS. If that appeal fails, you can then take your case to Tax Court. From there, a judge will decide on your tax liability.  

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