Receiving a tax audit letter from the Internal Revenue Service (IRS) can be unsettling. You’ve worked hard to build your business, and facing an audit can be overwhelming.
What will the process entail? This blog post outlines the possible outcomes of the audit. After reading, you can better understand what to expect and take steps to ensure a smooth resolution.
What happens next?
Once the audit process is complete, the IRS will conclude the audit. The process can end in three ways:
- No change: In (this) scenario, the audit results in no changes to your original tax return. You have provided sufficient documentation and evidence to support your income and claimed deductions and credits, (with) the IRS (finding) no errors. In this case, you can finally breathe a sigh of relief and consider the audit process closed.
- Agree: If the IRS proposes changes to your tax return, for the balance due or perhaps a refund, and you agree with those changes, you will have to sign a form. This action signifies your acceptance of the changes and willingness to comply with the IRS findings.
- Disagree: If you disagree with the proposed updates, you may request a meeting with an IRS manager to discuss the disputed issues and try to resolve them. Alternatively, you can take advantage of the IRS alternative dispute resolution (ADR) program, which provides a mediated solution to resolve the dispute.
If you disagree with the proposal and there is enough time remaining on the statute of limitations, you can appeal with the IRS. This process allows you to present your case to an independent appeals officer who will review the audit findings and make a final determination.
Upon receipt of a Notice of Deficiency you would have the opportunity to file a petition with the US Tax court.
Preparedness is key
A tax audit can be scary, but it’s not the end of the world. By understanding the outcomes and taking proactive steps to ensure compliance, you can minimize the disruption to your business and even use the experience as an opportunity to refine your financial tax processes.