What Happens During an IRS Audit?
An IRS audit is a review of an individual's or organization's financial information to ensure that tax returns are accurate and comply with tax laws. Here’s what typically occurs during the auditing process:
1. Notification of Audit
The process begins with the IRS sending a formal notification, typically via mail. This letter outlines the specific tax years under review and the documents required.
2. Preparation
Once notified, taxpayers should gather the necessary documents, such as income statements, receipts, and deductions. It's crucial to be organized and to respond promptly.
3. Type of Audit
Audits can take several forms, including:
- Correspondence Audit: Conducted through mail, asking for specific information.
- Office Audit: Held at an IRS office, requiring in-person meetings.
- Field Audit: Performed at the taxpayer's home or business, usually more comprehensive.
4. The Audit Process
During the audit, the IRS agent will examine the documents provided. They may ask further questions or request additional information. Taxpayers can clarify their positions and provide context.
5. Conclusion and Outcome
At the end of the audit, the IRS will determine if any changes need to be made to the tax return. If discrepancies are found, taxpayers may owe additional taxes, fines, or have the opportunity to appeal the decision.
Being well-prepared and understanding the audit process can significantly ease the experience.