The IRS just rolled in an IRS notice, informing that you fall under their audit. The thought of being subjected to an IRS tax audit is unsettling. Most small businesses and entrepreneurs running them tussle through to complete the audit as quickly as possible. In cases where the exit is impossible, seeking a hand from a Tax Consultant Company sounds best. However, the question remains of how long it actually takes to be audited? Clearly, it depends.
An IRS audit is simply an examination of an individual’s or an organization’s financial status in order to ensure the information has been reported right, as per the tax laws. The audit the IRS sends to you verifies whether the reported tax amount is appropriate. In order to know the nooks and crannies of the IRS tax representation, seeking a helping hand from a Tax Planning Service can benefit in the long run.
How Long Does the IRS Audit Take?
There are a variety of IRS Tax Audits. Based on the underlying conditions, the timeframe to complete the audit can vary. In almost all cases, the IRS completes an audit within only a couple of months, extending up to a year from the date it commenced.
The IRS (Internal Revenue Manual) usually cites that audits must be completed within or up to a maximum time frame of 26 months post the date of the due tax return, or the date it was filed on.
It is, however, almost not possible to obtain the completed audit immediately after filing the taxes. All it takes is a specific time to be fully closed. Although the IRS has a time limit of three years to audit the return, they usually like closing it long before the limitation expires.
In fact, as per the IRS Traning Guide, agents of the IRS are required to “strictly adhere” to the regulation of opening and closing all audits within a span of 26 months, post the due date of the return.
In cases where tax fraud is briefly indicated, the IRS then does not follow any statute of limitations. Rarely, if a large amount of unreported income has surfaced in their logs, the statute can run almost six years. However, the IRS rarely picks up its audit, considering the extended statute.
The IRS prefers to audit for a maximum of three years, where usually the auditor closes it in less than the allotted time.
Types of Audit
Learning the type of audit is equally as important as knowing when it will be closed. There are three types of IRS Audits, which typically last from a couple of months to almost a year long.
- Mail Audits are Quicker and Simple
In this case, the IRS audits by means of the mail system, usually notifying taxpayers within a span of seven months from the date it is filed. Mail Audits are generally completed within about three to six months, on the basis of the involved issues and how quickly you respond to the received letter.
- Office audits Move Quickly Too
You or your tax attorney is going to set up a meeting with the IRS agent at an IRS office. The IRS begins auditing within only a year after you have filed the return, wrapping up the procedure anywhere between three to six months. However, there can be a delay in case the information you submit is not complete, or if the auditor detects any concerning issue, thus deeming fit to extend the audit timeframe.
Field Audits can last up to a year (more in case issues arise)
The IRS, in case of field audits, sets up a meeting at your business or home. The IRS begins auditing within a year post the file return. Usually, the IRS keeps Field Audits handy in case any difficult situation surfaces, which often involves small businesses.
Field audits take the longest to complete because the IRS, in this case, is supposed to run an extensive review of the finances and records you hold. Field audits potentially last up to multiple tax years as well.
Other Factors that can Extend Audit Time
- In case the IRS finds a loop of things to change on your return, also called adjustments, then the auditor might want to dig more through the information. The higher the scrutiny, the higher will be the audit time.
- The auditor may have a lot more tasks to pull through when dealing with small businesses. That is especially because it is quite a hassle to track the income small businesses have, which typically does not get reported as the information statements the wage earners acquire. It is like Forms W-2 and 1099. IRS auditors spend their time looking at and reviewing records, such as websites, bank accounts and client accounting records to find whether the business has reported its income. This is what adds up, piling the time.
- In many cases, the IRS can pursue a penalty. In case the IRS has to add a pile of adjustments to your return, then they usually want to pursue penalties, adding more time to the audit time frame. If the IRS pursues the most severe penalty of all – “Fraud” – their auditor might end up going “silent”. Meanwhile, the IRS begins making a conclusion. In cases like these, the audit can last for a few handful years if they continue criminal prosecution. However, circumstances like these are extremely rare.
- The audit time can stretch if you disagree with adjustments processed by the auditor. In case you disagree with the auditor, you can take your case up to the IRS appeals, or in fact to court as well, thus expanding the time. You at least add a delay of six months, or likely a year, if you have pursued IRS appeals, based on the issues you are contesting.
The time of an IRS audit can extend and rack a pile of years in case the issues mentioned above start arising in no time. The best advice here, if it is a mail audit, is to respond as promptly as possible. For instance, if you do not have the documents at present, try your best to present all the pieces of evidence you have in hand to support your stance.In case it involves office or field audits, it is best to let the professionals take care. Getting help from an experienced tax pro to tackle the difficult part for you would be the best decision at the end of the day. It is because the most important part of the backstory is to wrap the audit as fast and effectively as possible.