IRS conducted 505,514 audits last tax season. Here's what to do if you're selected.

Core Insights - The IRS processed approximately 266 million tax returns for fiscal year 2024, with only 505,514 audited, representing about 0.19% of returns, indicating that audits are rare and do not imply wrongdoing [1] Group 1: IRS Audit Process - An IRS audit is a review of an individual's or organization's financial records to ensure tax return accuracy according to tax laws [1] - Audits are increasingly driven by algorithms and machine learning models that identify returns with a high likelihood of errors [1] - A human IRS employee reviews the return before deciding to proceed with an audit [2] Group 2: Notification and Response - Taxpayers will be notified of an audit by mail, and any phone calls or emails claiming to be from the IRS should be treated as potential scams [2] - To verify the legitimacy of an IRS letter, taxpayers can use the CP or LTR number on the letter [3] - Upon receiving an audit letter, taxpayers should read it carefully for action items and deadlines, and respond by the due date [4] Group 3: Rights and Responsibilities - Taxpayers have rights during the audit process, including the right to professional treatment, privacy, and representation [6] - Failing to respond to the IRS does not eliminate the audit; the IRS will proceed with the information available [5] Group 4: Audit Types and Documentation - In fiscal year 2024, 77.9% of audits were conducted via mail, while 22.1% were in-person audits [7][8] - Taxpayers should prepare by gathering specific documents requested by the IRS, which may include receipts, bills, and legal papers [12] - It is important to organize documents and provide explanations for each to facilitate the audit process [13] Group 5: Audit Duration and Follow-Up - There is no set time limit for an IRS audit; duration depends on complexity and the availability of both the taxpayer and auditor [15] - Taxpayers can check the progress of their audit by calling designated IRS numbers or through their IRS online account [16] Group 6: Audit Outcomes - After the audit, the IRS will notify taxpayers of the findings, which could result in no changes, requests for more information, agreement with proposed changes, or disagreement with changes [18][19] - Taxpayers have the option to appeal if they disagree with the audit findings [23] Group 7: Audit Prevention - The IRS does not disclose specific factors that increase or decrease audit chances, but accurate reporting of income, expenses, and credits may reduce the likelihood of an audit [20] Group 8: Record Keeping - Taxpayers are required to keep records used to prepare their tax return for at least three years from the filing date [15] - The IRS generally audits returns filed within the last three years, but may extend to six years in certain cases [22]