A tax audit is an examination of a taxpayer's financial information by the Internal Revenue Service (IRS) to ensure that the information reported on tax returns is accurate and complies with tax laws. The IRS may conduct an audit by mail, in-person at an IRS office, or at the taxpayer's home, place of business, or accountant's office.
During an audit, the IRS may request documentation to support the information reported on tax returns, such as receipts, invoices, and bank statements. The IRS may also ask questions about specific items on the tax return or request additional information about the taxpayer's financial situation.
There are several factors that may trigger a tax audit, including:
If you are audited, the IRS will notify you by mail or phone. The notification will include information about the items being audited and the documentation needed to support those items. You will have the opportunity to provide the requested documentation and respond to any questions from the IRS.
After the audit is complete, the IRS will either accept the tax return as filed or propose changes to the return. If changes are proposed, the taxpayer can either agree to the changes or appeal the decision through the IRS appeals process.
While there is no guaranteed way to avoid a tax audit, there are steps you can take to reduce the likelihood of being audited: