While the chance of being audited by the IRS is relatively low, it’s still important to know what to do if you’re selected for an audit. The IRS can audit tax returns to verify the accuracy of the information reported. An audit can be stressful, but understanding the process and knowing how to prepare can make a big difference. This post will explain the basics of an IRS audit and how to handle one if it happens to you.
What is an IRS Audit?
An IRS audit is a review of your tax return to ensure that the information you reported is correct. The IRS may audit a tax return randomly or because they suspect that there are discrepancies in the filing. Audits can happen for various reasons, including:-
Discrepancies in reported income
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Missed deductions or credits
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Unreported or underreported income
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Random selection
Types of IRS Audits
There are three types of audits:-
Correspondence Audits
This is the most common type of audit and typically happens by mail. The IRS will send you a letter requesting additional information or documentation to verify specific items on your return. -
Office Audits
If the IRS needs more detailed information, they may request an office audit, which requires you to visit your local IRS office. This type of audit is usually for more complex issues, such as business deductions or large charitable contributions. -
Field Audits
Field audits are the most comprehensive type of audit and involve an IRS agent visiting your home or business to review records and conduct interviews. These audits are typically for larger businesses or high-income earners.
How to Prepare for an IRS Audit
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Keep Accurate Records
The key to surviving an audit is having organized and accurate records. Keep track of all your receipts, bank statements, and financial records. These documents will help you prove your deductions and income. -
Respond Promptly
If you’re selected for an audit, respond quickly and follow the instructions in the IRS letter. The longer you wait, the more complicated the process can become. -
Hire a Tax Professional
If you’re worried about handling the audit yourself, consider hiring a tax professional to represent you. A professional can help you navigate the audit process and communicate with the IRS on your behalf.
Although an IRS audit may seem daunting, it’s possible to handle it with preparation and organization. By keeping detailed records and responding promptly, you can minimize the stress of an audit. If you need help preparing for an audit or have questions about your tax return, The Tax Axe is here to help you through the process.
Navigating tax season can be challenging, especially with the prevalence of misinformation. By debunking these common tax myths, you can make more informed decisions and avoid unnecessary pitfalls. Whether you’re filing your taxes yourself or working with a tax professional, it’s essential to stay informed and proactive. For personalized advice and assistance, don’t hesitate to reach out to a qualified tax professional who can help you navigate your unique situation.
