Tax audits and examinations are an accounting procedure where the IRS (or state tax authority) examines your individual or business financial records to ensure you filed your tax return accurately.
There are four types of IRS audits:
Correspondence Audit: the IRS service center sends a letter asking you for more information concerning a part of your tax return. The IRS is generally seeking receipts, checks and similar information to substantiate your deductions.
Office Audit: the IRS Service Center asks you to bring certain documents in to your local IRS office, where the audit is conducted.
Field Audit: is a comprehensive audit and involves the IRS agent coming to your place of business to conduct the audit in person.
Taxpayer Compliance Measurement Program Audit (TCMP): The primary purpose of this type of audit is to update the data used to write the IRS computer scoring program by analyzing a large group of randomly selected intensive audits, conducted every few years. Every part of the tax return must be substantiated by documents, including birth and marriage certificates.
Fines, penalties and interest may be incurred if there is an increase in tax due at the end of an audit.
A tax professional can deal directly with the IRS on your behalf and can help organize and limit the amount of information provided.
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