If You Got A Tax Audit, Don’t Panic — Here’s What To Do
Audits from the state or the IRS aren’t reserved for movie plot lines or mobsters who finally left enough of a paper trail to be caught. They happen to real people every day. Actually, it happened to me. I’m not kidding — I was in a total panic for at least 15 hours because of it, too.
Instead of continuing to panic, though, I decided to complete some heavy research and do both of us a solid. As it turns out, simply getting a letter in the mail saying that your tax forms are under review isn’t the end of the world. Crazy, right?
Why You’re Getting Audited
There are a few reasons why your taxes were chosen for review. First, you likely have already filed your taxes before getting a notice from the state or IRS. So, there are two ways these organizations could have flagged you:
1. You were randomly selected.
Yep, you can be randomly selected for an audit once you submit your tax forms. Yes, it’s rude, but you gotta follow the rules. Most likely, you did everything right. Just submit the forms again and you’ll be good to go.
2. You were flagged for a reason.
Whether you didn’t accurately report all of your income, were too vague with business expenses, earned more than $200,000 during the last tax year or broke some foreign account rule, something isn’t right with those taxes. It might be completely unintentional, but you may have missed or messed up a form when submitting all of your information.
What You Should Do
No matter why you were flagged, you’ll need to do a few things. If you got your notification in the mail, you’ll likely be asked to resend all of your forms to whoever sent it to you (again, either your state department or IRS) via mail or online.
If you received a notification that you need to visit an office, it gets a little more serious. Aside from providing the appropriate materials, you’ll be questioned about your income and the agent may recommend you bring a lawyer with you.
Add another terrifying layer to auditing and you have “field audits,” which include an IRS agent visiting your home and physically going through your files. It’s very unlikely that you’ll have this scenario happen to you unless you have been doing some seriously shady stuff, but it’s still good to know.
The Potential Outcomes
There really are two potential outcomes in the beginning: you send your forms back and you’re in the clear, or you send your forms back and the IRS or state department make amendments to your tax return (or payment). From there, you can either accept the amendments and be in the clear or fight the amendments. If you decide to fight the proposed changes, you’ll just meet with someone and provide further evidence that you deserve the outcome you’re arguing for.
Ultimately, tax audits will likely turn out to be nothing special. You’ll either be totally fine or maybe have a tweak to your return or payment, but it’s important not to freak out. While scary, this is standard stuff. You’re gonna be okay, just like me.