Receiving an audit notice from the IRS can be a stressful and intimidating experience for any business owner or individual. However, understanding the process and being prepared is your best defense. As Polk County’s local tax experts, we’ve created this essential guide to help Lakeland residents and businesses navigate the audit process with confidence.
What is an IRS Audit?
An IRS audit is an official review or examination of an organization’s or individual’s financial information to ensure it has been reported correctly, according to tax laws, and to verify the reported amount of tax is accurate. Audits can range from a simple request for more documentation to a comprehensive, in-person review of all your financial records. They are typically selected either by random statistical formulas or because something in your tax return has triggered a red flag in the IRS’s system.
Key Steps in the IRS Audit Process
Understanding the timeline can help demystify the process. Generally, an audit follows these four key stages:
1. Receiving the Official Notice
The IRS will always initiate an audit by sending you an official notice via mail—they will never initiate contact by phone call or email. This letter will explain what is being audited (which tax year and which specific items), the type of audit, and what records you need to provide.
2. Gathering Your Documents
Once you receive the notice, the next step is to gather all relevant financial records. This can include receipts, bank statements, bills, loan agreements, legal documents, and any other proof supporting the items reported on your tax return. Organization is critical at this stage.
3. The Examination
This is the audit itself. It can take place by mail (a correspondence audit), in an IRS office, or at your place of business (a field audit). An IRS agent will review your records and may ask you questions to verify the information on your return.
4. The Final Report
After the examination, the IRS agent will provide a report with their findings. If they propose changes, you will have the option to agree or disagree. If you agree, you will sign the report and pay any additional taxes or penalties. If you disagree, you have the right to appeal the decision.
How to Prepare for Your Audit in Polk County
Your actions after receiving an audit notice are crucial. Here are the most important steps to take:
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Do Not Ignore the Notice: The problem will not go away. Responding promptly is essential.
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Organize Your Financial Records: Collect and organize all the documents requested in the audit notice. The better organized you are, the smoother the process will be.
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Understand the Scope: Read the notice carefully to understand exactly what the IRS is questioning. Avoid providing documents or information that has not been requested.
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Do Not Contact the IRS Directly: It’s easy to say something that could be misinterpreted or that might unintentionally expand the scope of the audit. All communication should be handled by a qualified professional.
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Consult with a Local Tax Professional: The most important step you can take is to seek professional representation. An expert can communicate with the IRS on your behalf, protect your rights, and ensure the audit is handled correctly and efficiently.
The Best Defense is a Proactive Offense
The best way to handle an audit is to prevent it from escalating in the first place. Proactive monitoring can often detect the very issues that trigger an audit, giving you a critical head start. Our IRS Account Monitoring service for Polk County businesses is designed to provide that early warning, allowing us to resolve potential issues before they ever become a formal audit.
Your Local Lakeland Tax Experts Are Here to Help
Navigating an IRS audit can be complex, but you don’t have to do it alone. As a local firm rooted in the Polk County community, we understand the unique challenges faced by Lakeland businesses and residents. If you’ve received an audit notice or want to protect yourself proactively, contact us today for a confidential consultation.