How Long Does an IRS Audit Take?

How Long Does an IRS Audit Take?

Whether you're already being audited or you're simply worried about this happening in the future, it's good to know what the process involves and how long it takes. Every situation is different, and if your tax return is very simple, your audit might be over within three months. However, small businesses can often be audited in the field, which means that the IRS official visits their place of business. Such a process may take a year.

When and Why Will I Be Audited?

Not everyone is equally likely to be audited. In fact, the people who are chosen by the IRS are more likely to have made a mistake than those who are not, so the selection process isn't completely random. For this reason, it's best to always file your taxes correctly from the start because you can avoid being chosen at all. If your situation is complex or you're not sure how to do this, you should contact a professional and get some help with your taxes.

Once you've completed your tax return, the IRS has three years to start an audit. Most of the time, this will happen in the first year, but it's legal for them to begin the process later. In certain cases, the three years can be extended, but you should contact tax specialists if you're being audited more than three years after your return has been filed.

The Tax Audit Process

If you provide clear and comprehensive information, your audit is likely to be wrapped up within three to six months. This is particularly true if your tax return was fine and the IRS doesn't find any issues with it. However, your audit might be extended if you don't provide all the information that is needed or if they suspect there are issues in other areas or years. They might expand their investigation, which can extend its duration significantly.

If you've been audited and you're not sure how to handle the situation, get in touch with competent tax professionals who can help speed up and simplify the process for you. Even if you think that your situation is complicated, someone who's trained in tax laws will be able to see through it and give you the best advice possible.

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Field Audits

Most audits are either completed by mail or at the IRS office. These are usually straightforward and won't take very long. However, you might be subject to a field audit if your situation is especially complex, which is often the case for small businesses. During such an investigation, the IRS official will visit your place of business and conduct the audit there.

Field audits are complex because they usually involve an extensive review of all of your business transactions, records, and finances. They can also span multiple tax years. For this reason, they may take much longer than regular audits, sometimes a year or more.

Factors that Affect the IRS Tax Auditing Process

So, how long does an IRS audit take? Aside from the type of audit you're facing, there are several other factors that influence the process. For example, your audit might be shorter if there are few adjustments to make, if you're an employee, and if the IRS decides that a penalty is not necessary. Let's have a look at some of the factors that are most likely to influence the IRS tax auditing process.

There Are Several Adjustments

If the IRS auditor who reviews your case finds an issue with your tax return, they will make changes to it, so you might have to pay more taxes. This is called an adjustment. When there are only a few adjustments to make, the official will likely believe that they were just mistakes and your case should be wrapped up within a few months. However, you'll be subject to a deeper investigation if there are many adjustments.

This can indicate to the auditor that you are not careful when filing your taxes and that there might be more issues to uncover. For this reason, they might start to look into other years, which can prolong the process significantly.

You Are a Small Business Owner

Employees' tax returns are usually quite straightforward, so their audits don't take as long as those of small business owners. When you run your own firm, you have a lot more responsibility, and there are also more opportunities to make mistakes with your taxes. Small business income is sometimes hard to track, so the auditor is likely to spend more time looking through your bank accounts and client accounting records.

There Are Penalties

In addition to adjusting your tax return, the IRS might decide to impose penalties on you if they believe that what you did goes against the law. The worst-case scenario is fraud, which might stretch out your audit over several years and involve prison time because it is a very serious offense. However, this is rare, and only around 2,000 people are charged with fraud each year.

It's more likely that you'll have to pay a cash penalty, and if you've never had such an issue before, you can even use first-time penalty abatement in order to get it dismissed. If you're facing an IRS penalty, it's best to contact a tax specialist because they will know how to best communicate with the auditor in a way that reduces or eliminates the issue.

You Disagree with the Results

You might not agree with the results of your audit, so you need to take your case to IRS appeals or to court. Depending on the exact nature of the issue, this might add 6-12 months to your audit. However, it can be worth it if you believe that the auditor has made a mistake or is pursuing you for something you are not guilty of.

How to Deal with an Audit

Being notified by the IRS about an upcoming audit can be very stressful and upsetting. In most cases, it's best not to attempt to resolve this on your own because any mistakes you make during the process can make things worse for you.

By enlisting the help of a qualified and experienced tax professional, you can get the issue resolved more quickly, and you can prevent a similar problem from cropping up in the future because they'll help you file your taxes right every time. This can save you a lot of time, money, and hassle in the years to come.

How long does an IRS audit take? This depends on your employment status and the nature of the audit, but most cases are wrapped up in around 3-12 months. IRS tax auditing can be a complex process, so you will benefit from the help of professionals. Get in touch with us at Tax Alliance in Santa Ana, CA to speak to a specialist who can help you to navigate your audit and prevent you from making tax mistakes in the future.