We have compiled helpful answers into two groups for you:
- Quick Q&As with brief answers.
- Questions that require more detailed answers, of which we linked to their own pages.
Quick FAQs
What happens if I ignore an audit?
Simple, the IRS will assess the additional tax, penalties, and interest and then proceed to enforce payment. Ignoring an audit is never a good idea.
How far back can the IRS audit my return?
The IRS can generally assess additional tax three years after the due date of the return or the date the return was filed, whichever is later.
I received a Form 1099-K, does the IRS audit these taxpayers more?
The IRS uses Form 1099-K in many small business and gig economy worker audits. Form 1099-K has information about a taxpayer’s credit card, debit card, and other third-party payment processors that the taxpayer uses in their business. The IRS looks at this information to see if the income is reported on the return (i.e. matches the 1099-K to the return). If there are discrepancies, it will increase the taxpayer’s likelihood for audit.
Do I have to pay the audit tax due notice immediately if it is right?
No, you can request a payment plan later. Also, you can request any of the collection alternatives after the tax is assessed.
Should I be scared of an IRS audit?
Taxpayers who do not want to deal with the IRS should seek the assistance of a tax professional. Mail audits are relatively easy as they generally only require a written response to the IRS to prove a few items on the return. Office and field audits are much more comprehensive and can lead to more criminal prosecutions. Office and field audits should only be handled by tax professionals.
What happens if I miss the mail audit response deadline?
You can request that the IRS reconsider the audit assessment. This is fairly common and involves preparing one complete response and sending it to the IRS for reconsideration. Taxpayers should contact the IRS before sending to make sure that they are responding to the correct IRS Correspondence Examination Unit location.
Can I respond to the mail audit by fax?
Yes, and that is the preferred method if you are close to the 30-day response deadline. Be sure to number your pages so the tax examiner will know if they are looking at your complete response. Also, follow up two weeks later to make sure the IRS has received and is processing your response.
How do I ask the IRS to remove the penalty on the mail audit notice?
In your mail audit response, you will need to contest the penalty by providing the facts and reasonable cause argument that states why the penalty should not be assessed.
How will I know that the audit is completed, and the IRS agrees with my response?
If you agree the IRS will assess the tax and you will receive IRS notice CP 22E. If you believe your return was filed accurately and provided information to prove its accuracy, the IRS will issue a no-change letter (Letter 590).
How do I contest a penalty in an office or field audit?
After the auditor proposes the penalty, you will need to provide evidence to show that you made a reasonable attempt to report the items correctly on your tax return. Once the penalty is assessed, it is very difficult to be removed (requires audit reconsideration).
Will the IRS contact other people (relatives, customers, friends, business associates, etc.) in my audit?
It is possible for the IRS to contact third parties, including people who are aware of your financial affairs as well as financial institutions used and business partners and associates. The IRS will issue a letter in advance of making these contacts which will give you the opportunity to provide the information requested or to contest the third-party contact request.
How successful are taxpayers when contesting their audit in IRS appeals?
It depends on the strength of the taxpayer’s case. The taxpayer will need to show the IRS’ factual errors and incorrect application of the tax law. The IRS can settle the case based on “hazards of litigation” – that is, their chances of losing the case in court.
Can appeals ask me to extend the statute of limitations?
Yes, IRS procedures require one year remaining on the statute of limitations to assess additional tax before the case is forwarded to IRS Appeals. Failure to extend the statute means that the IRS will proceed to issue a Statutory Notice of Deficiency. Great care should be given to extend the assessment statute. It is recommended that the taxpayer only provide a short extension and reevaluate any additional extension requests to make sure the IRS is making progress on the case.
Expanded FAQs
Click on any question below for a detailed answer.
- What are my chances of an IRS audit?
- What are the top IRS audit targets?
- Does the IRS target people with virtual currency transactions more?
- Can someone “turn me in” to the IRS?
- What are common IRS audit issues in a office and field audit?
- What are “must follow” rules in an IRS audit?
- How long does it take to resolve an IRS audit?
- What should I know if I am assigned to a field auditor (revenue agent)?