What to Expect During an IRS Audit, According to Tax Professionals

Michelle Yeoh in the movie “Everything Everywhere”.

Source: imdb

Tax audits are rare

Typically, the IRS uses software to rank income, and when the rating is high enough, it can be flagged for audit, explained Michael Prinzo, managing director of CliftonLarsonAllen’s tax office.

“This is compared to the total population of other incomes with similar income or deductions, and when there is an outlier or multiple outliers, it increases the likelihood that someone might get a verification notice,” he said.

Most checks are made by correspondence.

While “Everything, Everywhere, All at Once” features a jittery personal exam, Losey said most audits happen through “correspondence” or letters that come in the mail. You have 30 days to respond by phone or mail.

According to a report from Syracuse University, in fiscal year 2022, 85% of IRS audits were conducted in absentia.

Alternatively, you can get a letter saying you’ve been selected for an audit with an “information document request” or IDR and specific questions about the return, Prinzo said. This may require interacting with an agent through a phone call or meeting.

Taxpayers are usually afraid of IRS exams. There really is no cause for concern.

Michael Princeo

Tax Managing Director at CliftonLarsonAllen

However, many such checks are being conducted remotely, Prinzo said, especially with the onset of the pandemic. But if it’s a personal exam and you’re working with a tax professional, that professional usually moves into their own office.

After the audit, the IRS reviews the information provided and may submit additional IDRs before deciding whether the return is correct.

If the agency determines the declaration is incorrect, it will propose an adjustment set out in a “30-day letter” that gives the taxpayer one month to respond if they disagree, Prinzo said. But many IRS exams close unchanged, he said.

“Taxpayers are generally afraid of IRS exams,” Prinzo said. But if your declaration is accurate and you have supporting documents, “there’s really no reason to worry,” he said.

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