Sometimes, the IRS may decide to audit you because something apparently suspicious appeared in your filed taxes, or because you failed to report all income the service knows you received during the year. In other cases, the IRS may decide to audit you at random. Regardless of the service’s reasoning for taking a closer look at you and your tax obligations, the processes involved in an audit remain similar.
What might you expect as the subject of an IRS audit?
Types of audits
Typically, the IRS conducts audits in one of three ways. The process involved varies considerably based on the type of audit you must undergo.
If you are part of the overwhelming majority of those audited, you may need to take part in an audit by mail. Typically, this involves producing additional information or documentation that explains why you filed your taxes a certain way and then sending it to the IRS through the mail.
Depending on circumstances, you may have to undergo an in-office audit or a field audit. An in-office audit involves you visiting a local IRS office so that you have a chance to not only produce documentation but also explain why you filed your taxes the way you did.
Finally, a field audit, which tends to be the most extensive and daunting type, may prove necessary if the IRS has numerous questions about what you submitted. This typically involves having an IRS agent come to your home or business to conduct an extensive investigation into your finances and taxes. There may be a possibility of criminal charges depending on what the agent discovers.
About 90% of Americans who undergo audits wind up having to change something on their taxes. In some cases, though, these changes may prove to be in your favor.
Once the IRS proposes making specific changes to your tax return, you have the option of either agreeing to them or rejecting them. If you reject the proposed changes, you may need to meet with another IRS representative or request an appeals conference to plead your case.