People often look for one-size-fits-all types of answers to know about how long does an IRS audit take. It depends on the kind of tax audit operating under the careful supervision of IRS representation that may result in either getting your tax returns or facing dreadful IRS audit penalties.
However, it’s happy news to know that all of the operations must be carried out within a particular time limit, known as the statute of limitation. How far back can an IRS audit refer to a duration of up to three years from the due date of the return or the date you filed it. For instance, if you’re pointing the returns on 15th January 2020, the statute would expire on 15th January 2023.
Significance of Audit Type
How long does an IRS audit take depends on the type of audit being carried out and the probability of the occurrence of errors in the financial records of your properties. The typical audit duration required ranges from three to six months. However, this can be either reduced or extended more than that.
1.Convenience of Mail Audits
Audits that are meant to be carried out via mail initiate with notices dispatched at your doorstep – could be your residence or office, and the taxpayers are generally notified within seven months after filing for the tax returns. This is the most straightforward and convenient way to wrap up your tax return filing and relevant surveillance within three to six months only if you’re confident enough with previously clean records.
The audit time duration is always subject to change with respect to the extent of errors – this is what triggers an IRS business audit, whether it is a startup or a fully established one.
2. Opportunity to Visit IRS Office
Another way to determine how long does an IRS audit take is to visit the IRS office, where you and their representatives will negotiate the ongoing taxation circumstances of your financial assets. These types of audits are usually started within a year of you filing for tax returns which are subjected to end within three to six months. Nevertheless, if you provide complete and accurate information or the audit team has detected some mistakes in the records, the process may be delayed and expanded to other areas for further investigation.
3. Prolonged Field Audits
Here comes the trembling and most repelling type of audit, where the IRS agents pay you a visit either at your workplace or home. The process of income tax auditing begins within a year of filing the returns. A time span of one year is enough to accomplish the task, but core details prolong the extensive review of your finances and records. Field audits also involve multiple tax years too.
How Long Does an IRS Audit Take – Contributory Factors
Now that you’re aware of the fact that it typically requires three to six months to get familiar with how long does an IRS audit take, there are certain contributory factors that can extend the time to complete the auditing procedure.
1. Taxation Adjustments
Many taxation adjustments are being made to your return which means that the agents will keep digging in the records whenever they want to keep looking for more errors or omissions. Higher chances of scrutiny imply the fact that you’ll be spending more time being audited.
2. Small Business Owners
If you own a small business, additional efforts to audit your startup are required because it’s quite a task for the IRS to track small business income. It gets reported on less information statements than wage earners receive.
A great deal of insight is required into various factors, such as bank accounts, websites, and client accounting records, to check and monitor if the business has reported all of its income. The time required to audit is multiplied even more for companies who deal a lot in cash because it raises suspicions that the generated revenue isn’t fully reported.
3. Disagreement with Auditors Adjustments
You are free to take your case to the IRS appeal or even the court if you are not satisfied with the adjustments made by the auditing agents. This can prolong the process with an additional time of six months and likely up to a year, depending on the issues you’re calling into question.
4. IRS Penalties
Moving towards IRS penalties is the outcome of many adjustments that are made in the financial records of your business – such situations are the most repelling you can ever find because you are being questioned about compliance with the regulations while simultaneously a case is being prepared for proposing penalties.
For instance, if the auditor has revealed fraudulent activities, they will most likely go ‘silent’ while leaving the financial judgment in the hands of the IRS decision-makers. In case criminal prosecutions are pursued by the IRS, the audit process may be delayed up to years.
What do you do after you finish with an audit?
Once an audit has been successfully concluded, it’s essential to develop and execute an action plan designed specifically to wrap it up efficiently and address any necessary improvements or corrective actions that arise as quickly as possible.
Audit planning is a vital area of the [audit], primarily conducted at the beginning of audit process, to ensure that appropriate attention is devoted to important areas, potential problems are promptly identified, work is completed expeditiously, and work is appropriately coordinated. “Audit planning” means developing a general strategy and a detailed approach for the expected nature, timing and extent of the audit. The auditor plans to perform the audit in an efficient and timely manner. In simple words, developing an overall strategy for the effective conduct and scope of the examination. Here are the main steps after finishing an audit:
Examine Audit Findings and Reports in Detail: Start by carefully reading over and assessing all audit findings and reports in-depth, paying particular attention to any strengths or weaknesses identified during an audit, noncompliance issues that arose or areas for potential improvement that need addressing.
Compile Recommendations: After conducting your audit, compile a list of recommendations and action items based on its findings, prioritizing them according to their significance and impact on your organization.
Sharing Results and Recommendations: Deliver audit results and recommendations to relevant parties such as management, department heads and employees involved. Transparency is vital in order to encourage accountability and foster change within an organization.
Create an Action Plan: Work closely with your team to devise an in-depth action plan outlining steps needed to address audit findings and implement improvements, assign responsibilities and set deadlines to maintain accountability for results.
Implement Corrective Actions: Begin taking corrective measures as quickly and systematically as possible, following each of your recommendations on your action plan. Monitor progress closely, making necessary modifications to stay on course with your goals.
Document Changes: Create detailed records of any modifications resulting from an audit, such as policy revisions, process enhancements or corrective actions taken – this documentation is essential for future audits and compliance verification purposes.
Continued Improvements: Use the audit process as an opportunity for continuous improvements within your organization by encouraging an environment where learning and adaptation take place to avoid similar issues in future years.
By following these steps, your audit process can not only uncover areas for improvement but also lead to fundamental, lasting changes and enhancements within your organization – and contribute significantly towards its long-term success.
Final Thoughts
Summarizing the content about how long does an IRS audit take, the best advice is to wrap it up as soon as possible. To achieve this level of easiness and comfort, make sure to keep a clean, clear record so as to avoid facing and suffering from audit penalties. Support your position and reputation by providing all the required documents with accurate information that is consistent with the other official records.