Chances are that you dread the idea of a tax audit. What is it exactly, and what can you expect if your returns get selected for review?
Tax audits refer to an examination by the Internal Revenue Service of a taxpayer’s tax return to determine if the information reported is accurate. The IRS may select returns for audit at random or based on specific criteria, such as a high level of income or deductions.
The audit process
If you’re selected for an audit, the IRS may send you a letter requesting that you provide additional information or documents relating to your tax return. These documents include tax forms, receipts and other records that support the information reported on your return.
You may also have to provide a statement explaining any discrepancies between the information on your tax return and the supporting documents you submit. If you are unable to provide all of the requested information or if there are significant discrepancies, you may end up in a district court tax trial.
What to do if you’re audited
If you’re selected for an audit, the best thing to do is cooperate with the IRS and provide all of the requested information. If there are discrepancies between your tax return and the supporting documents, explain them in detail and get ready to back up your explanations with evidence. You may also want to consult with a tax professional to help you through the audit process and ensure that you are taking all of the necessary steps to protect yourself.
Although the IRS typically audits only a small percentage of tax returns, the possibility of getting audited can be intimidating for taxpayers. If you’re selected for an audit, ensure that you are taking all of the necessary steps to protect yourself.