If you’re like most people, the words “tax audit” strike fear into your heart. And with good reason: being audited by the IRS can be a daunting, time-consuming experience.
But it doesn’t have to be. With a little knowledge and preparation, you can survive a tax audit relatively unscathed. Here’s what you need to know.
What is a tax audit and why do you get one
A tax audit is an examination of your tax return by the IRS. The IRS can audit you for several reasons, but the most common is discrepancies between your tax return and the information on your 1099 forms or W-2 form.
The IRS may also select you for an audit if your return is selected at random (this is known as a “random audit”). The IRS conducts random audits to ensure that taxpayers are complying with the tax laws.
What happens during a tax audit
During an audit, the IRS will request documentation to support the information on your tax return. This may include bank statements, receipts, and other financial records.
The IRS will also ask you questions about your return and how you arrived at the numbers you reported. Be honest in your responses and provide as much documentation as possible to support your claims. In most cases, an audit can be conducted via mail. However, in some cases, the IRS may require an in-person meeting.
The different types of audits
There are three different types of audits: correspondence audits, office audits, and field audits.
- Correspondence audits are the most common type of audit. With a correspondence audit, you will communicate with the IRS via mail. The IRS will send you a letter detailing the discrepancies on your return and requesting documentation to support your claims.
- Office audits are conducted at an IRS office and usually take place if you have omitted information from your return or if the IRS has questions about your return. During an office audit, you will meet with an IRS agent who will review your documentation and ask you questions about your return.
- Field audits are the most comprehensive type of audit and are usually conducted if the IRS believes you have committed tax fraud or if your return is selected at random. During a field audit, an IRS agent will come to your home or place of business to review your documentation and ask you questions about your return.
How to prepare for a tax audit
The best way to prepare for a tax audit is to keep accurate records of all your income, expenses, and deductions. This includes receipts, bank statements, canceled checks, and other documentation.
If you are selected for an audit, the IRS will notify you by mail. The notification will include information on what type of audit you are being subjected to and what documentation the IRS requires. Gather all the documentation you need and send it to the IRS as soon as possible.
If you are being audited in person, be sure to bring all the documentation you have with you to the meeting. This way, you can answer any questions the IRS agent may have.
tax vs audit
A tax audit is an examination of your tax return by the IRS. The purpose of a tax audit is to ensure that you have paid the correct amount of taxes and that you are in compliance with the tax laws. A tax audit can be conducted via mail or in person.
An IRS audit is different from a tax audit. An IRS audit is an examination of your financial records to determine if you have complied with the tax laws. An IRS audit can be conducted via mail, in person, or through electronic means.