What Happens During An Audit?

Dealing with taxes can be stressful, especially if an audit occurs. Unfortunately, it can be tricky to determine who will be targeted for an audit. Fortunately, even if an audit happens, there are many options available for moving forward.

No one likes paying taxes. The process of gathering receipts, filling out paperwork, and hoping for the best can be quite stressful for many adults. The possibility of facing an audit can add even more stress. While most American taxpayers understand that audits occur, they don't always know what to expect or what triggers an audit. Fortunately, the process is fairly straightforward.

How many people are audited each year?

While most taxpayers have heard the term "audit" and find the possibility to be quite intimidating, the reality is that very few adults are audited each year. In fact, only about 1% of all taxpayers are selected for audits each year. This is partly due to the fact that the IRS does have a limited number of resources. There is simply no way to evaluate and audit each individual tax return. Because of this, the IRS has a process in place for scanning tax returns and identifying returns that seem especially problematic. Returns that are missing information, for example, or that have obvious errors, are more likely to be selected for audits.

What can taxpayers expect during an audit?

First off, keep in mind that if you are audited, you will receive notification of this in the mail. The IRS will not call you or simply drop by your house to let you know you're being audited. Instead, they will send you a written notification that lets you know that auditing process has begun. Sometimes, an audit occurs because of a discrepancy in numbers. Perhaps you reported that your income was higher or lower than what the government's records show. Maybe your deductions seemed a bit "off" based on taxpayers with similar income levels. The IRS will request further information from you so they can continue their investigation and determine what steps to take next.

What should taxpayers do when they are audited?

If you have been notified that your tax return is being audited, make sure you reach out to a tax attorney who can provide you with assistance and guidance during this time. You'll need to provide as much information and documentation as possible to back up your tax return. For example, if you claimed charitable donations, you'll need to have receipts to show exactly how much you donated. Similarly, make sure you provide business paperwork, receipts, and bills. The more documentation you can bring with you, the smoother the process will be.

While facing an audit can be an overwhelming experience, the reality is that you are not alone. There are many ways an attorney can help you improve your experience with the audit, so make sure you contact a tax professional as soon as you realize your return is being audited. This will give you the chance to discuss your tax return with your attorney, identify potential problem areas, and determine how you can best move forward.