How an IRS Audit Could Impact Your Credit Score

Getting your taxes done can be stressful, but once you've pressed the send button or shipped your return off to the IRS, you may feel like you are on cloud nine. But even though tax day is behind you, that does not mean you're completely done with this task. In some instances, taxpayers have to go through an audit. This may seem like an intimidating process, it actually does not happen as often as you would think. According to U.S. News & World Report, the IRS audited less than 1 percent of returns in 2013. Even though getting an audit is not common, you should still understand this process and how to deal with it in case it happens.

What is an audit?
An audit is done to make sure that taxpayers have rightfully filed their returns and paid their exact tax amounts. There are generally three types of audits that occur:

  • Correspondence: An audit that is done through the mail
  • Office exam: The audit occurs at an IRS building
  • Field exam: The audit is held at a business' location

Most often, audits are performed on companies or high-income taxpayers.

What to do if you are audited
If you have been chosen for an audit, remain calm and work with the tax officials. Once you start receiving notices about your audit, don't forget about them. Ignoring these letters could get you into more trouble, and you could end up owing more or even have your credit score impacted in the process.

To help make this process go smoother, gather all your tax documents and receipts from your purchases and look over your original return. If you are confused about how to handle the audit or the type of paperwork you need, you can seek counsel from experts, including accountants. By seeking out advice from an expert, you will be able to take care of the situation smoothly and learn a few tips about how to do your taxes a bit more thoroughly and avoid repeating this situation.

Get it done as quickly as possible
The best advice for this situation would be to handle the audit as quickly as possible. If the IRS finds that you undervalued or overvalued something on your return, you will be given a penalty that you should pay immediately.