What is an IRS Audit?
An IRS audit is an examination of an organization’s or individual’s accounts and financial information to check that the information was reported properly and in conformity with the tax laws.
IRS audits allow the US government to verify the information submitted on tax returns. Find news and information about how to protect your interests.
The IRS can tax individuals based on what is classified as taxable income. In general, most income that an individual earns is considered taxable income by the IRS and one of the primary considerations in an IRS audit is whether all taxable income has been properly reported.
Generally, the IRS can include returns filed within the last three years in an audit. According to information contained on the IRS website, the IRS tries to audit tax returns as soon as possible after they are filed. This means that most IRS audits will be of returns filed within the last two years.
As a taxpayer, you have certain rights that must be protected by the IRS during the course of an IRS audit.
The IRS examiner performing the audit will select items that are worthy of examination. In selecting items for examination, the IRS examiner will choose items on the taxpayer’s tax return so that, with reasonable certainty, all items necessary for a substantially proper determination of tax liability can be considered.
In rare cases, the IRS may decide to audit a taxpayer’s return more than once. The reopening of a closed case is typically unfavorable to the taxpayer.
At the conclusion of the IRS audit, you will receive communication from the IRS regarding the auditor’s findings. Depending on the audit’s findings and how you wish to proceed, you have several options.
During an audit, the IRS will typically send written information requests to the taxpayer. They may issue a series of these written requests. The IRS also has the power to send written requests or summonses to third parties associated with the taxpayer, including banks, vendors, clients, and business associates.