Everything you need to know about Tax Audit


Every year when it’s the tax season, every business owner will give in all their attention to their tax returns. They will all be concern about one thing the most, the IRS may notice them for an audit! The Internal Revenue Service (IRS) does this audit as a double check to all the numbers you’ve provided to make sure that you are not missing anything on the return. Now, If you were true about being honest, there is nothing to be worried about. But the only time you should be worried is when you didn’t tell the truth to the IRS audit or state audit. They do this on a random basis to minimize the “Tax Gap”.

What is a Tax Audit?

The Tax Audit is an official examination of the tax department led by the IRS (Internal Revenue Service) to the tax returns that are been declared by the taxpayers. In this process, The tax department may require a full review of all the documents submitted by a Taxpayer. Different countries have different systems and processes to do a tax audit. It depends on the jurisdiction and law of different countries

Types of audit

There are so many different types of audit. here are they:

1. Mail Audit: 

This is a very simple and minimal tax audit system where a tax officer notifies you through a mail to submit additional documents regarding any deduction to the tax return declaration. If you declare a deduction due to a charity expense, and you use that expenses as a deduction to your tax returns, the tax officer may notify you to provide more papers to submit about that charity. Or, if a tax officer suspects something wrong in your return, the officer may require more papers to clarify that you’re white. 

Once you have submitted all the papers they wanted or explained as they demanded on about your returns and clarify all the suspicion, they will stop all the audit process; examination they like to call!
But if they are not satisfied with the answers you give them, if your submitted papers arise more questions about the return, they might go further about the inquiry and step even further to office audit or even field audit!

2. Office Audit: 

This is a partial process to the mail audit actually. The additional part to the Office Audit is that you have to go to the office in person along with the papers the tax officer required. You will bring all the additional documents as instructed by the officer with you and meet the officer and face a question session if needed. 

You will already have an idea about what is the sitting going to be about Because you already been notified by the officer as a Mail Audit. 

Well, if you’ve been called to the tax office, make sure you got all the information you need and double-check that you’ve got all the papers ready for them. And make sure you ask a lawyer or a professional tax preparer accountant to go with you and advise you on any situation.

3. Field Audit:

A field audit is the most in-depth audit from the tax department where the tax officer comes to your house most of the time and question you in order to examine all the documents you have submitted. This kind of audit happens to be a result of major suspicious flaws in the documents. This kind of audit takes place at the end of the economic year; after you declare your tax return. If you ever face such an audit, it would be better if you hire a professional tax preparer to help you.

There are more types of Tax Audit, Such as Desk Audit, Limited Audit, Comprehensive Audit, etc. but the above-mentioned Audit systems are the most practiced once that needed explanation. 

Why the IRS may Audit you!

There are several reasons that may cause a Tax Audit from the IRS. Make sure to get them all right and have the most possibility not to get an audit in the first place.

Math errors:

The most common reason to get a tax audit from the IRS is Math errors you may do while preparing the return. Don’t even accidentally make a mathematical error in the papers. Errors like forgetting a zero can cause you an Audit! A “Sorry” isn’t going to cut it. If you are doing the return by yourself, make sure to double-check it with the help of a professional inline. If you have a professional tax preparer hired to get the preparation part done, make sure to ask him to give it a double check before submitting it. 

Claiming too many donations to the charity

If you are a person who makes charity too often, it’s okay. But if you are Claiming too much charity returns, but your income source doesn’t really refer you to the capability, then you will definitely be examined. Or, if you don’t have all the papers ready with no suspicion that you’ve done all the charity, you will be examined. 

There are other reasons you will be examined by the IRS. They could be as simple as like:

  • Using round figures
  • Deducting too many work expenses
  • Failing to report any income source
  • Reporting too many losses
  • Claiming a home office deduction


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