The IRS audits, or examines, the tax returns of thousands of people each year. The process helps ensure that individuals and businesses are reporting accurate information – and paying the correct amount of tax. Those selected for an audit have not necessarily done anything wrong. In many situations, the audit will come back with no changes.
How You Are Selected
The feeling of having to face an audit can be very overwhelming. The first question many ask is, “What did I do to end up with this situation?”
There are many ways you could be selected. Computers randomly select many audits. In other cases, the IRS chooses participants in abusive tax avoidance transactions. If information is inaccurate or incomplete, this may trigger an investigation. If information does not match to identify the taxpayer, this could trigger and audit. Large corporations also face audits frequently.
How an Examination Happens
If you are selected for an audit, the process will be conducted either through the mail or through an in-person interview. The auditor will review the records of the taxpayer to ensure the information is accurate. This may be done at your home or at the local IRS office. The audit notification will inform you of what specific information you need to provide to the auditor at the time of the audit for verification. Generally, you will have time and the flexibility to work within your schedule to make an appointment for the audit to occur.
Once the auditor reviews the information, he or she will either accept the tax return as accurate or make adjustments. If both parties agree, then the audit is over. If you do not agree, you can file an appeal for further review of your tax filing.
