How Does an IRS Audit Work?


Quick Answer

During an IRS audit, a tax return is examined line-by-line to make sure that everything is in order and nothing unusual is listed. If a suspicious item is found, the auditor asks the taxpayer to explain or justify it. Depending on the results of the audit, additional taxes may be owed.

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How Does an IRS Audit Work?
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Full Answer

There are three different types of IRS audits, field, office and correspondence. During a field audit an examiner visits the taxpayer's residence or business to verify their tax return. One of the reasons a field audit might be done is if a large write off is made, such as a business vehicle, and the examiner wants to know why so much driving is done.

Office audits are done at an examiner's office. The taxpayer and his tax preparer, lawyer or other representative brings pay stubs, receipts and account statements in order to prove that all information on the tax return is correct.

Correspondence audits are completed through the mail and are done to address common tax preparation issues, such as accounting errors, unreadable entries and missing forms. The audit notice is returned along with the requested materials.

At the end of the audit, the taxpayer receives a 30-day letter that lists how the IRS plans to modify the tax return, a copy of the examination report and an explanation of the taxpayer's right to appeal. The taxpayer has 30 days to respond to the letter.

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