Tax Audit Reviews Series Part 2: What Can You Expect During an IRS Audit?
You still can’t believe that the Internal Revenue Service (IRS) has decided to audit your tax return. In addition to feeling nervous about the outcome of the audit, you feel confused about what the audit process actually entails. The most recent blog, Part 1 of a three-part series, discussed why the IRS may be auditing you, based on tax audit reviews. In this article, Part 2 of this three-part series, you’ll learn firsthand what an IRS audit actually involves.
The IRS will manage your audit either via a face-to-face interview or by mail to look at your tax records. However, the agency will first provide you with instructions for the audit by mail.
If the IRS chooses to audit you by mail, the agency will ask you for extra information regarding specific items on your tax return, like your itemized deductions, income, or expenses. However, if you don’t want to mail the IRS a large number of documents or books, you can ask the IRS for an in-person audit.
Note, though, that the IRS does accept electronic records generated via tax software in some cases. The agency might request these records instead of, or along with, other kinds of records. Your auditor will tell you exactly what he or she will accept.
As a general rule of thumb, the records that the IRS may ask you to provide as part of your audit include receipts, canceled checks, loan agreements, and travel tickets. Other documents you may have to furnish include bills, legal papers, travel diaries/logs, dental/medical records, and employment documents depending on your particular situation. According to federal law, you must maintain at least the past three years’ worth of records in case you are audited. Certain types of records, such as those related to a home or rental property, should be retained indefinitely.
In Part 3 of this series on IRS audits, we will discuss what will happen at the end of your IRS audit.