What is an IRS Audit?

The phrase “IRS audit” strikes fear into the hearts of individuals and businesses across the country. The threat of audit looms especially low as we approach tax season. While many people may fear an audit, most may not really understand what an audit is all about. An IRS audit is an examination of an individual’s or organizations accounts and financial record. The central purpose of an audit is to verify that everything was correctly reported according to tax laws and the proper tax amount was assessed.

If you are select for an audit, the IRS will notify you via mail. The audit process will not begin with notice of an audit via telephone. It is important to remember this as several telephone scans start with leaving threats of an IRS audit. Some people are randomly selected for audit. Other times, the IRS will select a person or organization for audit based on suspicious activity among their financial records and submitted tax forms. Some red flags that may lead to selection for audit include:

  • Failure to report a portion of your income
  • Claiming multiple charitable donations
  • Deduction of sizeable work expenses
  • Reporting a loss for your business several years in a row

There are several different ways the IRS conducts audits. The IRS may require you to send them more information via mail. You may also be asked to participate in an in-person interview. The in-person interview will include a review of your financial and tax records. It may be conducted in your home or place of business or another venue. The letter you receive putting you on notice of an audit will provide instructions as to what information and records the IRS will need as well as whether the audit will require an in-person interview.

The audit process can greatly vary in the amount of time it takes. It really depends on the level of information the IRS is requesting and needs to sift through. It can also depend on how easily an in-person interview can be scheduled. One of the largest factors in determining how long an audit will take is the complexity of the issues involved. Being as organized as possible with your records and being as available as possible to schedule your in-person interview will help make the process move along a bit faster.

At the conclusion of your audit, the IRS may conclude that no change needs to be made based on its investigation. Alternatively, the IRS may propose changes. You may agree or disagree with these changes. If you disagree, you may file an appeal.

An IRS audit is a serious manner and requires delving deeply into your finances. The outcome of the audit can have a significant impact on you personally and professionally. Contact our dedicated tax attorney at Fairfax Law Firm to help you navigate the audit process.