Are IRS Mail Audits Really Something to Worry About?
Many people think IRS audits are very bad. The IRS does 70% of it’s audits by mail. Just because you get an IRS audit letter, instead of and IRS agent, doesn’t mean the outcome will be different. In 2016, 89% of all mail audits resulted in higher taxes. The average amount of additional tax owed in an audit is over $6500, not including penalties, and interest.
Face to face audits have a slightly higher change rate of 92%. Many face to face audits involve higher income earners, and business returns. As a result, the average additional tax is almost 10X higher than in mail audits.
Should you worry about mail audits?
You shouldn’t worry about dealing wit the IRS in person. Most of the time, when the IRS starts a mail audit, the IRS will ask you to explain, or verify, something on your return. They might ask you to clarify things like:
- Income you didn’t report that the IRS knows about
- Filing status
What’s important is you respond correctly
If you’re audited through mail, you need to respond to the IRS by mail, with a complete explanation. That’s not nearly as intimidating as answering them in an interview with an IRS agent.
In mail audits, the IRS is asking you for things like
- Providing receipts, or documents, proving an item the IRS is questioning
- Explaining and clarifying something
If you provide the explanations by the deadline, you’ll be ok. Even if you don’t have receipts, the explanation might be enough to convince the IRS. Most tax evasion cases start with face to face audits. Mail audits shouldn’t cause the same anxiety as dealing directly with the IRS.
Worry about a mail audit, if you fail to respond to the IRS
Many people wonder what will happen if they:
- don’t respond to the mail audit at all
- send an incomplete response to the mail audit
- respond late
- send multiple letters to the IRS
- aren’t sure whether they are responding properly
The IRS doesn’t usually assign the mail audit to just one person. One specific IRS employee won’t be contacting you to handle the case and following up. If you don’t respond/respond late/respond incompletely, the IRS will like just disallow item it’s questioning, and send you a tax bill with penalties and interest.
If you send multiple responses, it just confuses the IRS. They have one central processing center which combines all of your letters. The IRS processes millions of taxpayer responses to audits, and notices. If the IRS doesn’t properly catalogue all of your letters, you could get a notice from the IRS that doesn’t include one, or more, of your previous correspondence.
Taxpayers who aren’t sure how to respond, often need the help an IRS mail audit attorney who can help you navigate the IRS and deal with the IRS for you.
How long does it take to resolve a mail audit?
If you respond on time with the letter which explains your situation and provides the necessary clarification – you’ll get a response fast. Mail audits can be concluded in 3-4 months if you are expedient. If you don’t act fast, mail audits can stretch for one year or more. If the IRS tax examiner decides you owe more taxes, you may still have options. You can agree, or ask, the IRS appeal office to handle and review your case.
IRS appeals aren’t intimidating. They look at your specific case, and any new information you have, in order to give an analysis of the findings.
If you owe more taxes, you can opt for a payment plan
You can setup a payment arrangement with the IRS.
You can get an extension.
You can get a monthly payment plan.
If you have financial hardships, the IRS also lets you defer payments, or settle.