IRS Audits: Understanding the Process and How to Prepare

Dealing with an IRS audit can be a daunting experience for many taxpayers. However, understanding the process and knowing how to prepare can significantly alleviate the stress involved. In this article, we'll demystify IRS audits by exploring the reasons for being audited, outlining the process involved, and providing guidance on preparing effectively.

What Triggers an IRS Audit?

An IRS audit is a review of an organization's or individual's accounts and financial information to ensure information is reported correctly according to tax laws and to verify the reported amount of tax is correct. Several factors can trigger an audit, including:

• Discrepancies in Reported Income: If the income reported on your tax return doesn't match the information provided by employers or banks, it can raise a red flag.
• Excessive Deductions: Claiming significantly higher deductions or credits than the norm for your income level may prompt an audit.
• High Income: Statistically, higher-income taxpayers are more likely to be audited.
• Random Selection: Sometimes, returns are selected randomly for audit using statistical algorithms.

Types of IRS Audits