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What is an IRS tax audit?

You may have heard of the term "audit" across other areas of your life. Still, when it comes to paying taxes, a tax audit is when the Internal Revenue Service takes a closer look at your tax return and analyzes the accuracy of the details in which you have provided. Usually, the IRS decides to audit an individual when there are details in your tax return that are out of the ordinary.

If you ever find yourself subject to an IRS tax audit, educating yourself on the reasons for receiving IRS audits and the different types of tax audits can help you prepare for any complications you may face. Additionally, consulting with a professional IRS audit attorney at Ideal Tax can help individual taxpayers resolve tax issues when they owe money to the IRS. Taxpayers may qualify for one of several IRS forgiveness programs.

Key Takeaways:

  • An IRS tax audit is when the IRS conducts a close analysis of your tax return to verify the accuracy of the details you have provided regarding income and deductions.
  • The IRS randomly selects individuals for tax audits to develop "norms" for similar tax returns.
  • The IRS may issue an audit letter when an individual's tax return involves issues or transactions with other taxpayers who are being audited.
  • You may also receive an audit notice if you report irregular income, have substantial income, possess foreign assets, or are involved with a cash-intensive business.
  • The IRS will never contact you by telephone, but will always contact you by mail.

Who gets selected for an IRS audit?

There is more than one reason that an individual may be selected for an IRS tax audit, and just because you receive an audit letter does not mean that there are complicated tax issues that must be resolved. However, there are instances in which you may be at fault. While a large number of taxpayers who are selected for an audit are chosen randomly, there are some factors that can increase the likelihood of being audited.

How Far Back Can The IRS Audit?

The IRS generally has three years to audit a return, although there are some exceptions. For example, if the IRS believes that a taxpayer has intentionally underreported their income, they have up to six years to audit the return. Additionally, if a taxpayer fails to file a return, the IRS has an indefinite period of time to audit the return.

Types of IRS Audits

Correspondence Audit or Mail Audit

The simplest type of audit that can usually be resolved by sending documentation by mail without meeting an IRS auditor in person.

Office Audit

An in-person audit at a local IRS office where the IRS officer takes a more in-depth look at your tax return information.

Field Audit

The most thorough type of audit that takes place at your home or business location and covers most or all items on your tax return.

Taxpayer Compliance Measurement Program Audit

Conducted using randomly-selected tax returns to evaluate compliance with tax laws and estimate revenue lost due to non-compliance.

How to be prepared for an IRS audit

You can prepare for an IRS audit by being diligent about keeping detailed bookkeeping records and organizing your financial and tax documentation. When you keep detailed documentation of your financial records throughout the tax year, you will be more likely to accurately fill out your tax return and determine the amount of taxes owed to the IRS.

What To Do When You Are Audited By The Internal Revenue Service

In the case that you are audited by the IRS, you don't need to panic about what to do. There are just a few steps that you need to follow to take care of your IRS audits once and for all.

1

Understand the scope of your audit

Read the entire audit letter to understand what the IRS is requesting from you, including deadlines and required documentation.

2

Prepare your response to the IRS letter

Gather all requested documentation and prepare for possible questioning about items on your tax return.

3

Respond to the IRS request accordingly

Respond to the IRS by their requested date with the required information to advocate your tax return positions.

4

Appeal your audit, if you disagree

If you disagree with the IRS findings, you can request an appeal within the 30-day deadline listed on your audit letter.

Do I need to hire a tax attorney when I receive an IRS audit?

Navigating the nuances of the United States tax law can be confusing for the average taxpayer, but if you are facing an auditing situation from the Internal Revenue Service, hiring a licensed tax attorney can give you the confidence you need to resolve your IRS audits without the stress. The Taxpayer Bill of Rights describes an individual's right to hire representation when receiving an audit.

Our Audit Defense Services

  • Complete audit representation
  • Document preparation and organization
  • IRS communication on your behalf
  • Audit defense strategies
  • Negotiation of audit findings
  • Appeals process representation

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