After feeling the relief that follows submitting taxes on time, having an IRS letter show up a few months later can be stressful. While sometimes the letter is only for a minor update notification, other letters announce government audits of individual tax returns.
If your recent letter is one of the latter kind, you may not know what to do. For those who have never faced this kind of situation before, the news can be scary. Before worrying too much, however, the best thing to do is to find out what the letter means. Talking to tax and/or legal professionals can be helpful as you do your research.
Three types of audits
When the IRS decides to examine your return more closely, there are three types of audits that the agency conducts:
- Mail audits
- Office audits
- Field audits
Regardless of how the IRS chooses to conduct an audit, you can usually expect to receive notification about the decision via USPS mail. With that said, mail audits themselves will request that you send back supporting documents. Office and field audits, on the other hand, are more thorough. Typically, they are also in-person.
Three types of outcomes
After an IRS audit, there are three possible outcomes. If the IRS approves of whatever you submit, then the audit ends and your taxes will not change. However, the IRS may also propose changes. In this case, you have the option to accept or deny the proposal. Based on your response, a third option is to schedule a formal appeals process if you disagree.
Although receiving notification of a tax audit is probably never a good feeling, it does not need to be a stressful one. Remember, the most important thing to do is to respond on time.
