To better or more fully understand about tax audits, one should first understand the meaning of an “Audit”. An Audit is a an official review or examination of your accounts or books by an independent body.
A tax audit is a type of audit by the IRS which they review and examine a tax return closely to verify the accuracy of income, deductions and taxes on the return. It is a detailed inspection, especially of any out of ordinary items listed on the tax return. The idea behind a tax audit is to ensure reporting of accurate accounting information (Income, Taxes, Gain, Loss etc.) in adherence to the tax laws.
Once selected for an audit, the IRS will request that the tax payer furnishes additional documentation or information to validate items in question on the return. The IRS can request proof or explanation through mail, office visit or field visit.
Mail audits are the simplest type of audits and do not require any meeting with the auditor. The IRS requests proof to validate the taxpayer’s claim or position taken with respect to an item on the tax return. Submitting the requested proof via mail should conclude the audit.
Office audits are conducted at the IRS office, which involves some questioning by an audit officer. This is relatively a more in-depth audit, and office audits require that the taxpayer brings specific tax return information to the meeting. A taxpayer has the right to bring a lawyer or accountant to represent him.
Field audits are comprehensive, and the broadest type of examination conducted by an IRS agent. Like the name suggests, these are conducted at the taxpayer’s home, office or accountant’s office. In general, these are conducted when there are many items on the tax return that are questionable.
