How often does the IRS audit?
FILE-Image of the Internal Revenue Service (IRS) building in Washington, D.C. (Kent Nishimura/Los Angeles Times via Getty Images)
The chances of being audited by the IRS are rare, but it can leave you with an uneasy feeling nonetheless.
Audits usually happen when the agency wants to take a closer look at your return to make sure it's reported correctly based on tax laws, the IRS explains.
If you’ve already filed a return and feel confident it's correct there are still some things to be aware of to avoid being audited.
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How often does the IRS audit?
IRS audits are rare and typically occur through a random selection and computer screening or related examinations, the agency noted.
With related examinations, the agency might select your tax returns when there are issues or transactions with other taxpayers, like business partners or investors, whose returns were selected for an audit.
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Under a random selection, returns are selected based on a statistical formula the IRS uses to compare your tax return against "norms," or other standard returns.
The agency develops these "norms" from audits of random samples of returns and they use this method to update return selection information.
What triggers an IRS audit?
Tax filers should be mindful of making sure the information on the return is accurate to avoid red flags with the IRS, including not reporting all of your income for the tax year, making mathematical errors, making too much money, claiming large deductions, and claiming business losses.
How am I notified about an audit?
If the IRS selects your account for an audit, the agency will send you a letter in the mail, and they won’t contact you by phone.
If I’m audited, what do I need to provide to the IRS?
If you’re audited, the IRS will provide a written request for the specific documents with a listing of records the agency may request.
How long does an IRS audit take?
The length of the audit depends on the type of audit, the specific issues with the return, the availability of information requested, the availability to schedule a meeting, and your agreement or disagreement with the findings, according to the IRS.
How far back can the IRS go to audit a return?
The IRS can include returns filed within the last three years in an audit. If the agency finds a serious error, they could add extra years but won’t exceed more than six years.
According to the IRS, the team tries to audit tax returns as soon as possible once they are filed, with most audits of returns filed within the last two years.
The IRS explains that if an audit isn't resolved, they could request extending a statute of limitations for assessment tax, meaning a period established by law when the IRS can review, examine, and resolve your tax-related issues.
This story was reported from Washington, D.C.