Tax Dictionary – IRS Audit

IRS Definition:

An IRS audit is a review/examination of an organization’s or individual’s accounts and financial information to ensure information is reported correctly according to the tax laws and to verify the reported amount of tax is correct.

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When the IRS audits your return, it is looking at accuracy. There are three types of audits:

Mail audits are the most common type of audit. In fact, three out of four IRS audits are conducted by mail. The IRS will ask you to substantiate (prove) the items in question by sending documents to a tax examiner in an IRS Service Center.

Office audits are done in person. In an office audit, you’ll meet with a tax compliance officer (auditor) at an IRS office. He or she will interview you. You should provide information and documents to the auditor to prove the income and items you reported on your return.

Field audits are the most in-depth of all. These audits take the most time and effort to complete. The IRS will visit your home or business and examine your returns for accuracy. These audits can be comprehensive. The IRS may investigate your lifestyle and finances to see if you reported all your income on your return. The IRS generally uses field audits to examine higher-wealth individuals, businesses, and specialty tax situations, such as a trust or employment tax return.

Learn how to handle an IRS audit.

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