The IRS does these audits by mail, generally notifying taxpayers within seven months of filing. Mail audits
usually wrap up within three to six months, depending on the issues involved and how quickly and completely
you respond to the audit letter.
Office audits usually move quickly
You (or your tax pro) will meet with the IRS agent at an IRS office. The IRS usually starts these audits
within a year after you file the return, and wraps them up within three to six months. But expect a delay if
you don’t provide complete information or if the auditor finds issues and wants to expand the audit into
other areas or years.
Field audits can last up to a year, or more if there are issues
In field audits, the IRS meets with you (or your tax pro) at your business or home. The IRS usually starts
these audits within a year after you file the return, and they often last about a year.
The IRS saves field audits for complex situations, often involving small businesses. Field audits take the
longest because the IRS will do an extensive review of your finances and records. Field audits often involve
multiple tax years, too.
Four other factors can extend the time to complete an audit
1. The IRS finds a lot of things to change on your return (called
“adjustments”)
If the IRS auditor is making a lot of adjustments to your return, he or she will often dig in and look for
more. This higher scrutiny often means that the auditor will open other tax years, so you’ll spend more time
under audit.
2. You own a small business
When it comes to small businesses, the auditor will have more work to do in the audit. That’s because it’s
harder for the IRS to track small business income, which doesn’t get reported on as many information
statements as wage earners receive (like Forms W-2 and 1099).
In small business audits, IRS auditors spend more time looking at records, such as bank accounts, websites,
and client accounting records to determine whether the business reported all of its income. This adds time
to the audit – and for businesses that deal in a lot of cash, it can add months if the IRS thinks the
business didn’t report all of its income.
3. The IRS pursues penalties
If the IRS makes a lot of adjustments to your return, the IRS will often want to
pursue penalties
, which can also add time to the audit. The IRS will ask
questions about how you tried to comply and build a case for proposing penalties.
If the IRS ends up pursuing the most severe penalty – fraud – the auditor will likely go “silent” while the
IRS makes the decision. In these cases, the audit can last for years if the IRS pursues criminal
prosecution. Luckily for taxpayers, that’s rare. The IRS pursues criminal fraud in only about 2,000 cases
(out of 155 million taxpayers) each year.
4. You disagree with the auditor’s adjustments
If you disagree with the auditor, you can take your case to
IRS
appeals
– and even to court – which would extend the audit. When you go to IRS appeals, you often add at
least six months – and likely up to a year – depending on the issues you’re contesting.
What to do
The best advice to wrap up an audit as soon as possible depends on the type of audit.
- For mail audits, respond promptly and thoroughly. If you don’t have all your documents,
provide your best evidence and explanations to support your position.
- Leave office and field audits to the professionals. Hire an experienced tax pro to deal
with the IRS for you. Your tax pro will properly prepare for the audit, anticipate IRS questions, advocate
for you with the IRS, and wrap up the audit faster.
Learn how to handle an IRS audit.
