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So you filed your tax return on time but your refund has yet to hit your bank account. Now, weeks later, you're sitting on a letter in the mail from the IRS saying it needs more information to process your tax return.
Although IRS audits are fairly uncommon (especially if you're an average earner), you may end up among the unlucky few whose returns are flagged for further scrutiny. And to be clear, getting audited doesn't mean you broke the law or did anything unethical. It could just mean that the IRS can't move forward in processing your return without more information. Here's what to do if you land in that boat.
1. Don't panic
Nobody wants to get audited. But rest assured that in the overwhelming majority of cases, you're not looking at massive financial penalties or jail time for getting something wrong on your taxes. In fact, you may not have gotten anything wrong at all. Sometimes, the IRS just needs extra documentation to support filers' claims, so don't think the worst if an audit letter arrives.
2. Read the letter carefully
Your IRS notice should come with specific instructions on what documentation the agency is looking for and what steps you need to take. Read those directions carefully so you know what to do, and note any deadlines you need to adhere to.
3. Gather the right documentation
Often, when the IRS conducts an audit, it asks for documentation supporting a given claim. Make sure to dig up the right information to satisfy the IRS's inquiry, but be careful not to provide too much documentation. Doing so could open up an unwanted can of worms.
4. Decide if you need a tax professional
Some audit matters are fairly straightforward. But if that's not the case in your situation, you're not sure how much documentation to provide, or you're just plain too nervous to respond to your IRS notice on your own, get some help.
If you used a tax professional to file the return that's being questioned by the IRS, that person or service is probably your best bet for getting assistance (and in that case, you may even be entitled to free audit support). Otherwise, seek recommendations from friends and family, and find a tax professional who can guide you through the process.
Don't flip out about an audit
Getting an audit notice is very unsettling. But remember, being audited doesn't always result in negative consequences. If you provide the IRS with the information it needs to verify your tax information, you may find that your refund amount (or the amount you owe) doesn't change one bit.
In fact, it's more than possible for a tax audit to work out in a filer's favor. You may, for example, end up being entitled to more money from the IRS, or owing less, once your tax return gets a second look. As such, it's important to handle your audit situation calmly and promptly. Doing so could lead to the best possible outcome.
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