Have you recently received a notification from the IRS that you are subject to a tax audit? Tax audits can be intimidating and confusing, but with the right information and preparation, they don’t have to be. In this article, we’ll discuss what an IRS tax audit is, how to prepare for one and how to defend yourself in the event of an audit. Keep reading to learn more!
Introduction to IRS Tax Audits
An IRS tax audit is when the IRS reviews your tax return to make sure everything is accurate. This can be done through a correspondence audit, where you simply send in documentation to support your return, or through a field audit, where an IRS agent comes to your home or business to review your records.
There are a few different reasons why you might be selected for an audit. The IRS might think that you’ve underreported your income, or they might question the deductions you’ve taken. The IRS could also randomly select your return for auditing.
If you’re selected for an audit, the first thing you should do is not panic. There’s no need to worry unless you’ve actually done something wrong. Even if you have made a mistake on your return, as long as you’re honest and cooperate with the auditor, the penalties will likely be minimal.
The best way to prepare for an audit is to keep good records of all your income and expenses throughout the year. That way, if the IRS does question anything on your return, you’ll be able to provide documentation to back up your claims.
If you are audited, the auditor will likely want to see receipts or bank statements to verify items on your return. They may also ask questions about how you arrived at certain figures on your return. Be prepared to answer these questions truthfully and provide any supporting documentation that they request.
What Does a Tax Audit Mean?
If the IRS believes you may have underpaid your taxes, they may select your return for an audit. This simply means that the IRS will take a closer look at your tax return to make sure you’ve reported everything accurately and paid the correct amount of tax.
Most audits can be conducted through mail correspondence, so you likely won’t need to meet with an IRS agent in person. However, if the IRS has reason to believe that you’ve committed fraud or there are other complicated issues with your return, they may request an in-person audit.
The first step in preparing for an audit is to gather all the documentation supporting the information on your return. This may include receipts, bank statements, 1099 forms and W-2s. Once you have all your documentation in order, review it carefully to make sure everything is accurate.
If you discover any errors on your return, it’s best to correct them before the audit. You can do this by filing an amended return using Form 1040X. Keep in mind that admitting to a mistake on your original return could lead to a higher chance of being audited in the future.
If you don’t think you did anything wrong but are still selected for an audit, don’t panic. The vast majority of audits result in no change to your tax bill. Even if the IRS does find errors on your return.