Got an IRS Audit Notice? Here's the One Thing You Shouldn't Do

It's a move that could get you in hot water.

Filing your taxes can be stressful enough in its own right. This holds true whether you owe the IRS money or end up waiting for a refund to hit your checking account. But perhaps the most worrisome element of dealing with taxes is getting audited.

Kiplinger reports that in recent years, the IRS has been auditing much less than 1% of all individual tax returns. So in reality, your likelihood of getting audited is pretty low to begin with.

But that doesn't mean you won't end up on the IRS audit list. And if that happens, what'll generally occur is that you'll receive a notice in the mail from the IRS asking for more information about your tax return, or disputing a specific element of your tax return.

In fact, you should know that the majority of IRS audits are conducted by mail, and not in person. The IRS simply does not have the manpower to knock on doors individually each time it needs to question a tax return.

Getting that letter, however, can be a daunting experience in its own right. This is especially true if you're not sure how to even respond.

But perhaps the worst thing you can do upon receiving an IRS audit notice is to ignore that letter and hope it goes away. Not only will that not happen, but you could end up being penalized financially for neglecting to respond to the IRS.

Don't just wish the problem away

You may be inclined to ignore your audit letter and hope the IRS won't pursue the matter. But that route is unlikely to work out well for you.

According to H&R Block, if you ignore your audit notice, the IRS will have the right to make changes to your tax return, like removing deductions or credits you've claimed. That could easily result in a lower tax refund or a higher IRS bill.

The IRS might also hit you with additional penalties for ignoring your audit notice. And if you don't respond to that letter, you'll effectively waive your right to appeal a decision the IRS makes in court.

How to handle an audit notice

In many cases, an audit notice is really just a way for the IRS to request more information. Let's say you've claimed a deduction for equipment needed to perform your side hustle on your tax return, and the IRS isn't sure that deduction is legitimate. In many cases, simply responding to that letter with receipts and other proof of your purchases will make the problem go away with no financial harm to you.

If you're not sure how to handle your audit notice, your best bet is to reach out to the tax professional who helped you file the return in question. And if you did your taxes solo but don't know what to do about your audit letter, find an accountant or tax professional who can help. Many people in these roles are willing to offer support even if they weren't the ones to handle your taxes in the first place.

It's easy to see why you might get spooked when an audit letter arrives in the mail. But no matter what you do, don't make the mistake of ignoring it. Doing so is apt to make the problem exponentially worse.