Tax Dictionary – IRS Business Audits

IRS Definition

The IRS examines (audits) tax returns to verify that the tax reported is correct.

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The IRS audits business tax returns to make sure that all income, expenses, and credits are reported correctly. The IRS chooses to audit returns that are the most likely to have errors, based on complex criteria. During an audit, the IRS will ask for documents or other proof of the items in question on the return.

The IRS has three years from the date the return is filed to start and finish an audit. Most audits are started within one year of the date the return was filed and take less than a year to complete.

There are three types of audits:

  • Mail audits are usually limited to just one or two issues and are done entirely by mail. This is the most common type of audit.
  • Field audits are conducted by an IRS agent at your business and are more complicated examinations.
  • Office audits are also more complex, and usually take place at an IRS office.

Learn how to handle an IRS audit.

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