Learning that your small business will be subject to an IRS tax audit can be unnerving. Most entrepreneurs in that position understandably want the audit completed as quickly as possible. Knowing what to expect can help you manage the uncertainty that comes with the audit process.
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How long does an IRS audit take?
There are different types of IRS tax audits. The specific timeframe needed to complete an audit can vary depending on the underlying circumstances.
In most cases, the IRS completes an audit between a few months to one year from the date it was initiated. The Internal Revenue Manual specifies that audits must be closed no more than 26 months after the date the tax return was due or the date it was filed, whichever occurs later.
However, don’t expect to be audited immediately after filing your taxes. The IRS has a three-year window to audit your filed tax returns, although in certain circumstances they can go back six years or even longer. So, if you filed for tax year 2018 on April 15, 2019, the IRS could choose to start an audit of that return any time up to April 15, 2022. Note that for the 2020 tax year, individuals and business owners with pass-through income have an extended tax filing deadline. Returns for 2020 are now due by May 17, 2021.
What happens during a tax audit?
In some cases, audits are conducted as “correspondence” audits. In this type of audit, which typically occurs within seven months of filing a tax return, the taxpayer receives a notice from the IRS providing questions that need to be answered or information the taxpayer is expected to give to the auditor, with a deadline for responses. This may be as simple as verifying or confirming information to the IRS, in which case, the audit is essentially completed when you respond affirmatively. This type of audit generally wraps up within six months.
Another type of audit is an “office” audit, where you are asked to bring records to an IRS office. Office audits are generally started within a year of filing a tax return and wrapped up within six months, although they can take longer.
A “field” audit involves a visit to your home or office (or that of your tax preparer) by an auditor to review records. Field audits often take approximately one year, and often involve a more thorough look at business records for multiple tax years.
How do I check the status of my IRS audit?
When your tax audit is complete, the auditor will formally conclude it. There are three possible outcomes to any audit:
- The auditor finds the audit identified no changes to your previously filed return(s).
- The audit includes specific findings and you understand and agree with those findings.
- The auditor proposes changes and you understand the proposal, but disagree with the findings.
While the audit is underway, your auditor will be the best resource to check on the status. The auditor will provide you with contact information on the IRS notice letter at the start of the audit. If you are unable to reach your auditor, you can speak to an IRS customer service representative by calling (800) 829-1040 between 7 AM and 10 PM local time.
Will I still get my refund if I get audited?
In most cases, you may not receive notification about a tax audit for several months after you file your tax return. If you were due a refund when you filed your taxes, you will likely receive it before an audit is started. It is possible, however, that the IRS auditor will subsequently determine changes to your tax return are necessary, which could change the amount of your tax refund. If you receive a tax refund and it is later determined through an audit that you were ineligible for the full amount, you will have to repay the IRS.
A Tax and Audit Professional Can Help You Through Your IRS Tax Audit
If you received a letter from the IRS about a tax audit or if you are in the midst of an audit now, it can be comforting to have a trusted professional in your corner for audit and tax advice. Regardless of your circumstances, the size of your business, or your industry, help is available. Ask a lawyer for guidance today!
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.