When the IRS needs to examine your tax return, you can expect a tax audit. This can happen no matter if you are an individual or a company owner, and the reasons for an audit may be different. Many people dread from the tax audit, but if you did everything legally, there is nothing to be afraid of.
What can you expect from a tax audit?
First of all, you do not need to be afraid that the IRS employees will show up at your doorstep unannounced. In case the IRS believes your tax return requires an audit, they will notify you via email. Once the agents visit you, you can expect that they will ask to review your bank statements, records of the asset sale, alimony, pension and other financial records you may have. If you previously had an audit, the agents may ask you about the information on that audit, such as the time, the place and the results.
You will also need to present the agents with the previous tax filing documents, as well as tax return documents. They will ask you if you had any tax penalties before. You will need to provide some more information, and the IRS employees will determine whether the data are relevant for the audit.
Basically, there is nothing to be afraid of, since you will only need to collect the documents and present them to the IRS agents. When the IRS notifies you of the audit, you will have enough time to prepare all the necessary documents and sort them so they are at hand when you need them.
Field audit is the most serious type of audit, where the IRS agents will visit you at your home or office. In case you have earned $100,000 or more, you may expect this type of audit in case you get the notification. In addition to the standard documents they ask to see, IRS agents may ask you for some additional documents.
It is important to know that this type of audit is the least common, and that it is usually conducted when there is a doubt that there is something suspicious about your tax return. If you face this type of audit, prepare all the documents regarding your finances, ownership and the like.
Office audit is less intimidating and less serious than field audit. You will get the invitation via mail to visit the IRS office and provide some additional information about your tax return. In this case, you should also prepare all the necessary documents regarding earnings, spending, and ownership and bring them with you. It is also a good idea to have your tax attorney or accountant to come with you, so they can help you provide all the necessary information.
This type of audit is the least severe, and at the same time the most common. You will get the mail from the IRS where they require you to provide some additional information about your tax return. If you keep all the records and receipts, you should not have any trouble deal with this on your own and provide the IRS with the information they need. However, if you do not keep the records of your finances, you may want to hire a tax attorney to help you deal with the IRS.