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If you are the subject of a tax audit and have recently received a letter from the Internal Revenue Service (IRS), you may likely respond like most Americans, with some element of fear and dread.
The fact is, the audit rate is fairly low (around 1%) if you make below $200,000 a year, but for those Americans who are the subject to an audit, the stress can be very high and you may have questions about what immediate steps you should take to respond. While getting a letter from the IRS is never what you want to find in your mailbox, it does not have to spell disaster.
Here are 5 steps to follow if you have received written correspondence from the IRS:
Do not panic: In the vast majority of audits, the IRS has a simple question about an aspect of your tax return. Remember that audits take a lot of resources for the IRS to complete, so it is in their best interest to keep the process and the outcome as simple as possible. In the majority of cases, information needs to be provided and verified. Once you send in the information (or money), the audit is complete. A correspondence audit is the more common type of audit and can be handled entirely in writing.
Verify the audit is real: The IRS will not call you or email you to inform you of an audit, this information will only come in writing, in the mail. The IRS will also not ask you to provide personal information and will not demand that you pay in a certain way. Be on the lookout for fraudulent correspondence claiming that they are the IRS.
Carefully read, review, and respond to the letter: Most audits can be resolved fairly easily as noted above, but the key is to respond as directed by the IRS in a timely manner. Ignoring the request will not make it go away. If you do not understand what is being asked of you, seek the help of a professional tax service or attorney to give you advice about how best to respond.
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