A tax audit is essentially an accounting procedure that examines your financial records to ensure you filed your tax return accurately. If the IRS finds errors or purposeful mis-reportings, you’ll have to pay the recalculated return amount and any interest. The IRS can choose to audit your tax return for a number of reasons, including:
There are 4 basic types of tax audits: correspondence audit, office audit, field audit and a taxpayer compliance measurement program audit.
A Correspondence Audit is when the IRS service center asks you for more information concerning a part of your tax return. This usually happens if you a made a simple error on your return.
An Office Audit is when the IRS Service Center asks you to bring certain documents to your local IRS office and the audit is conducted there. This could happen if you had an unusually high tax deduction.
A Field Audit is when an IRS agent comes to your place of business to conduct the audit in person.
A Taxpayer Compliance Measurement Program Audit is the most extensive type of audit, where every part of your tax return must be substantiated by documents.
If you do not have all the information requested, contact your auditor immediately to discuss what information you do have. The quicker the audit begins, the quicker it can be resolved.
Follow these 6 tips if you receive an audit:
Once the audit is completed, you will receive the findings outlined in detail. You have 30 days to do any of the following if you do not agree with the audit results:
If you receive a notice of an audit, it is best to approach the situation in a timely manner and to seek professional guidance from an experienced tax professional.