An IRS audit is a review or examination of an individual’s or organization’s financial information and accounts to ensure that the reported tax amount is accurate and that the information is reported correctly according to tax laws.
Reasons for Selection
The selection for an audit does not necessarily indicate a problem. The IRS employs various methods for selecting returns for audit, including:
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Random selection and computer screening: Returns may be selected based on statistical formulas, comparing them against “norms” for similar returns.
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Related examinations: Returns may be selected if they involve transactions or issues with other taxpayers whose returns have been selected for audit.
Notification Process
If your return is selected for audit, you will be notified by mail. The IRS will not initiate an audit via telephone.
Audit Methods
The IRS conducts audits either through mail or in-person interviews to review your records.
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Mail audits: The IRS will request additional information about specific items on your tax return, such as income, expenses, and itemized deductions.
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In-person audits: These audits may take place at an IRS office (office audit) or at the taxpayer’s home, place of business, or accountant’s office (field audit).
Required Documents
The IRS will provide a written request for specific documents, which may include:
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Bank statements
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Canceled checks
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Credit card statements
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Invoices
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Receipts
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Tax returns
Response Timeline
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Mail audits: You can request a 30-day extension by fax or mail.
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In-person audits: Contact the assigned auditor or their manager to request an extension.
Statute of Limitations
Generally, the IRS can audit returns filed within the last three years. However, if a substantial error is identified, additional years may be added. The IRS typically does not go back more than six years.
Audit Duration
The duration of an audit varies depending on factors such as:
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Type of audit
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Complexity of issues
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Availability of requested information
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Scheduling availability
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Agreement or disagreement with findings
Taxpayer Rights
As a taxpayer, you have certain rights during an audit, including:
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Professional and courteous treatment
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Privacy and confidentiality
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Explanation of information requests and consequences of non-compliance
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Representation by yourself or an authorized representative
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Appeal of disagreements
An audit can conclude in three ways:
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No change: No adjustments are made to the return.
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Agreed: The taxpayer agrees with the proposed changes.
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Disagreed: The taxpayer disagrees with the proposed changes.
Next Steps
If you agree with the audit findings, you will be asked to sign an examination report or similar form. If you owe money, various payment options are available.
If you disagree with the findings, you can request a conference with an IRS manager, consider mediation, or file an appeal if the statute of limitations allows.
What the IRS is actually looking for that could trigger a tax audit
FAQ
What does the IRS check during an audit?
What triggers an audit with the IRS?
Who is most likely to get audited by IRS?
How long does an IRS audit take?
How do IRS audits work?
The IRS manages audits either by mail or through an in-person interview to review your records. The interview may be at an IRS office (office audit) or at the taxpayer’s home, place of business, or accountant’s office (field audit). Remember, you will be contacted initially by mail.
How is a tax audit conducted?
The audit may be conducted entirely by mail or through a face-to-face interview at a local IRS office, your home, your tax preparer’s office or your business. Wherever the audit occurs, you may be asked to supply certain records that the IRS examiner will need to complete their review.
Why does the IRS audit my tax return?
Other times, the IRS might audit you because your return involves transactions with another audited return — such as an investor or business partner. But the IRS often selects taxpayers based on suspicious activity. With NerdWallet Taxes powered by Column Tax, registered NerdWallet members pay one fee, regardless of your tax situation.
What percentage of tax returns are audited by the IRS?
In recent years, the IRS has audited significantly less than 1% of all individual tax returns. Plus, most audits are handled solely by mail, meaning taxpayers selected for an audit typically never actually meet with an IRS agent in person. Also, increased audits won’t happen overnight.