Several factors determine how long an audit takes. The type of audit, complexity of the issues, availability of information requested, schedule availability of both parties, and your agreement or disagreement with the findings will affect the speed of the process.
Why am I being audited? What do I need to show for an audit? What happens in an audit? How long does an audit take?
What happens after an audit? Audits typically end up one of three ways. The IRS can find that no change is necessary if you have substantiated all the items under review. If the IRS proposes changes, you can agree or disagree with those changes. If agreed, you will be asked to sign a specific form, depending on the type of audit conducted, and you will be instructed how to pay if money is owed. If you disagree with the proposed changes, you can request a conference with an IRS manager, contact an appeals officer offered by the IRS for mediation, or file an appeal by submitting a formal written protest.
Most audits happen two to three years after a return is filed. Keep in mind that state revenue departments can and do audit tax returns, as well, and in many cases, have a tougher reputation than the federal government does. Loans are originated and funded through our lending arm, Accion Opportunity Fund Community Development. You may opt out of receiving certain communications as provided in our Privacy Policy.
LegalZoom and NBA team up to support small business. Learn more. Apply for a Loan. File a return with math errors Errors in addition or subtraction will likely get caught, flagging your return for an audit, even if the mistake is in the favor of the IRS. File a schedule C Many business owners will have to file a Schedule C to report business income as part of their individual tax returns.
Take the home office deduction As described in part three of our tax series, Small Business Tax Deductions , if you regularly work at home in an area exclusively dedicated to your business, you are allowed to deduct some of the cost of that space from your income tax.
Use your car for business This is another area some people take advantage of, so the IRS tends to look carefully. Apply for a Loan Get Started. Tell us a little about yourself, your business and receive your quote in minutes without impacting your credit score.
There are several outcomes that can arise following an audit. In many cases, the IRS will agree that your documentation answers its questions and accept your return as-is. In other situations, the IRS might propose changes to your return, at which point you have the right to agree or contest. If you opt for the latter, you may need to meet with an IRS representative to further discuss your case or request a formal appeals conference. That said, those changes could work out in your favor.
If you are among the unlucky few who wind up dealing with the IRS face to face, it's natural to be worried or intimidated. If you bring an accountant or attorney along, that professional will be there to guide you and, ideally, do much of the talking. But if you're going it alone, here's what to do. First, whether you're meeting with an IRS agent at home or at a field office, get organized beforehand and come prepared with all of your records and documentation.
That said, only present information relevant to the issues at hand or questions being asked. The last thing you want to do is open up an additional can of worms and subject yourself to further scrutiny. Furthermore, don't be rude to the agent you're meeting with or argue excessively. Even if you have nothing to hide, you'll come off as overly defensive, which could arouse further suspicion. Finally, do not make the mistake of justifying an error by pointing out that you've always done things that way in the past.
The IRS has three years to initiate an audit following the date of each filed return. Pointing out an erroneous deduction you've taken in the past isn't going to get you off the hook this year; if anything, it could prompt the IRS to examine your previously filed returns. In an ideal world, we'd all file our taxes and be done with them.
But if that doesn't happen, don't panic if you do get audited. Most of the time, the audit process is quick and painless, and if you're honest on your tax return to begin with, you stand an even greater chance of coming out unscathed.
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