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Understanding the IRS Audit Process: FAQs
Michel Knott
As tax season comes to an end, the potential for IRS audits can become a concern for many. While audits are not common, they do happen, and it's important to be prepared. At Knott CPA, we want to ensure that you have the information you need to navigate an audit confidently and with minimal stress. Below, we've compiled a list of frequently asked questions about the IRS audit process to help you understand what to expect and how to handle it if you are ever audited.
How Common Are IRS Audits?
Q: How often do IRS audits occur?
A: Audits are relatively rare. The IRS and other tax authorities conduct audits to verify the accuracy of tax returns, but the vast majority of taxpayers and businesses are not audited each year.
Q: What might trigger an audit?
A: The IRS uses automated matching to ensure all reported income is included on your return. Discrepancies can lead to a letter requesting corrections, but this differs from a full audit.
What to Expect During an Audit
Q: What happens if I am selected for an audit?
A: Here’s a brief overview of the audit process:
- Notification: You will receive an official notice from the IRS or relevant tax authority. This notice will specify which parts of your return are under review.
- Documentation: You'll need to provide supporting documentation, such as receipts, invoices, and bank statements, to substantiate the income, deductions, and credits claimed on your return.
- Communication: Throughout the audit, you may need to answer questions and provide additional information to the tax authorities.
- Resolution: After the audit, the tax authority will issue a final determination. If discrepancies are found, you might owe additional taxes, penalties, or interest. If your return is accurate, no further action is needed. You have the right to appeal if you disagree with the results.
Q: When can audits happen?
A: Audits can occur at any time but are most common after tax season and during the summer. They can happen year-round and vary depending on the type of audit and the tax authority involved.
Q: Are some businesses or individuals more likely to be audited?
A: Yes, the IRS may conduct random audits, select returns based on risk factors, or target specific industries or tax issues.
Preparing for an Audit
Q: What should I do if I’m audited?
A: Do not panic. An audit is a review process to ensure your financial information aligns with your tax return. Maintain organized records and promptly respond to any requests from the IRS.
Q: How can Knott CPA help?
A: Our team is here to support you throughout the audit process and ensure ongoing tax compliance. If you have specific questions or need to discuss audit-related matters, please feel free to contact us. We’re always here to assist you.
