What Happens When You Get Audited?


































Episode 343 - No one enjoys receiving a letter from the IRS, especially when they open it and realize that their return is being reviewed. The odds are longer than most people realize, but what should you do if this happens to you?













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Transcript of Podcast Episode 343





Hello, this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, what happens when you get audited?
No one enjoys receiving a letter from the Internal Revenue Service (IRS), especially when they open it and realize that their return is being reviewed. There are few things that create more fear and anxiety than a so-called “exam letter.” It very often means that you’re looking at a significant time commitment just to put together the documentation they’re looking for. It could also mean some serious expenses for additional taxes, interest, penalties, and accounting fees.
Back in episode 328 we talked about some of the things that may trigger an audit. Today, we take things a step further and talk about how to prepare if you are one of the unfortunate few who get tagged.
In a recent article for Schwab.com, Hayden Adams, a former IRS agent, explains what happens during an audit, and has some suggestions on how to get ready.[1]
The first step, before anything else, is to confirm that it actually is the IRS you are speaking to. We’ve discussed all sorts of scamsters in previous episodes, and they love pretending to be the IRS. And with good reason. Any mention of the words “Internal Revenue Service” is bound to get the someone’s attention.
Note that if the initial contact is through a text message or email, there’s a good chance that it’s a fraud. Almost every IRS audit begins with a letter in the mail, one that usually says, “your return has been selected for examination.”
The letter will also provide the name of the IRS agent, their phone number and the case number. This gives you the opportunity to call the IRS independently so they can verify that the information is accurate.[2]
The next step is to figure out what type of audit it is. There are generally three categories: correspondence audits, office audits, and field audits.[3]
A correspondence audit takes place entirely by mail. The IRS notices what they believe to be a mistake on the tax return and asks you to pay additional taxes by a certain date. At that point you can either pay the extra tax (plus potential penalties and interest) or let them know why you think they’re the ones who made the mistake.
An office audit tends to get into more detail. It involves a visit to the IRS office involved, where you bring the documentation required for the specific issue the IRS is questioning. On these types of audits it’s generally recommended that you organize your documentation as best you can before you arrive.