Tax audits have a bad reputation. While being audited might mean doing a little extra paperwork, there's nothing to fear about the actual financial review. Even if you made an inadvertent mistake during your tax return preparation, the IRS is unlikely to penalize you beyond charging interest on any past due payments. As long as you didn't willfully commit tax fraud, there’s no reason to stress over a pending audit. Here are a few facts about tax audits you may not know. 

What You Need to Know About Tax Audits 

1. They're Usually Conducted by Mail 

In many cases, IRS audits are conducted by mail. Typically, the taxpayer will receive a letter informing them of the situation and requesting additional documentation. After they mail back the required paperwork, the IRS will review the account, make any necessary changes, and send another letter informing them of the resolution. 

2. They're Not Necessarily Timely 

The IRS can audit tax returns that are up to six years old. Barring any substantial errors, though, they will only look back as far as three years. As such, taxpayers should retain all documentation from the past three years. If your filing cabinets are overflowing, consider digitizing all critical documents during your tax return preparation every year to simplify your storage situation. 

3. They're Not Automatically Unfavorable 

While it’s true that an audit can reveal that you owe the IRS more than anticipated, there are scenarios in which audits work out in the taxpayer’s favor. The outcome will depend on the circumstances. Even if it turns out you do owe more than you originally paid, it may be possible to implement a reasonable payment arrangement, so the additional tax burden does not drain you financially. 

If you’re facing an audit, turn to the enrolled agents at Burch & Associates, Inc. in Lincoln, NE, for guidance. From tax return preparation to retirement planning, this firm can assist with all your financial needs. Comprised of tax experts who are backed by the Department of Treasury, they counsel both individuals and businesses. To explore all the tax services they provide, visit their website. To arrange for IRS defense or start your tax return preparation, call (402) 483-4791.