What to Expect During a Tax Audit: A Comprehensive Guide

A notice of audit might be intimidating. The IRS seems to be watching your finances. Not to worry! Knowing what to expect helps ease this process—explaining a tax audit and how to prepare.

What is a Tax Audit?

A tax audit is an IRS review of your return. They do that to ensure you reported everything correctly and paid enough tax. You may not have done anything wrong. Many people are audited annually.

Reasons for an Audit

While it may seem random, the IRS audits returns for familiar reasons. Among them:

• Math errors: Simple mistakes can trigger an audit.

• Inconsistent information: It may be suspicious if your result doesn’t match other sources.

• Deductions or credits: Claiming unique or substantial deductions increases audit risk.

Types of Audits

Three audit kinds are typical:

• Mail audit: The easiest is answering mail questions.

• Office audit: To provide more information or documents, visit an IRS office.

• Field audit: The most thorough audit involves an IRS agent visiting your home or business to review your records.

Preparing for an Audit

Good records prepare you best for an audit. Keep receipts, bank statements, and other tax documents. Some more tips:

• Stay calm: Better said than done, but panicking won’t help.

• Be organized: Keep your paperwork organized to save time and frustration.

• Understand your rights: Know what questions are allowed.

• Consider professional help: Hiring a tax specialist can calm your stress.

  
  

What to Expect During the Audit

This is a general outline of what you can encounter in your audit, depending on its type:

• Review of records: The IRS will check your financial documentation to validate your return.

• Questions: Your income, deductions, and other tax return details will likely be asked.

• Request for additional information: Your agent may request further paperwork on your return.

After the Audit

After the audit, you’ll receive a tax return change notice. If you accept the findings, you’ll likely have to pay more taxes. You can appeal if you disagree.

Remember, audits are not fatal. Stay organized, know your rights, and consider expert aid to navigate this process effectively.