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The tax audit selection and notification process

It’s almost been six months since the tax deadline passed. Taxes have probably been the last thing on your mind over the summer. That can change quickly when an envelope arrives in the mail with the IRS logo in the upper left corner, however.

With all the recent reports of taxpayer scams, remember that initial correspondence from the IRS is usually always in writing – a letter through the U.S. mail. If you receive a phone call regarding an audit, look for a followed up letter confirming the audit. The agency never communicates via email.

The IRS conducts tax return reviews and examinations to ensure that the information you reported is correct and supports your tax calculations.

How does the IRS select which tax return it will audit?

As the agency absorbs more budget cuts and deals with staff retirements, computers play a larger role. The three main methods include:

  • Computer screening – Often returns are selected at random based on statistical modeling
  • Matching documents – If Form W-2 or Form 1099 does not contain the same information provided by an employer it can prompt an audit
  • Related examinations – One audit of a business or investor may result in cascading audits of others who are closely related 

The complexity of the audit will affect how the audit occurs. Most people probably envision an in-person interview; however, the IRS usually resolves audits through the mail.

You need to know your rights during the process. For example, you have the right to retain representation and to appeal a decision. Whether an audit occurs via mail or in-person examination, speak with an experienced tax attorney who will be able to help you through the process.

Source: IRS.gov, “IRS Audits,” Last updated May 18, 2015

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