{"id":10242,"date":"2024-12-24T15:38:47","date_gmt":"2024-12-24T20:38:47","guid":{"rendered":"https:\/\/www.jdavidtaxlaw.com\/?p=10242"},"modified":"2024-12-24T15:38:47","modified_gmt":"2024-12-24T20:38:47","slug":"what-is-a-tax-audit-everything-you-need-to-know-to-prepare-protect-yourself","status":"publish","type":"post","link":"https:\/\/www.jdavidtaxlaw.com\/blog\/what-is-a-tax-audit-everything-you-need-to-know-to-prepare-protect-yourself\/","title":{"rendered":"What is a Tax Audit? Everything You Need to Know to Prepare & Protect Yourself"},"content":{"rendered":"\t\t
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The tax process seems to be more complex, and few words strike more fear into the hearts of taxpayers than \u201ctax audit.\u201d An <\/span>IRS tax audit <\/span>is a formal review conducted by the IRS to verify the accuracy of your tax return. In FY 2023, the <\/span>IRS closed 582,944 tax return audits<\/span><\/a>, leading to $31.9 billion in recommended additional tax assessments. This high volume of audits and significant financial impact highlights the importance of proactive <\/span>tax audit services<\/span><\/a> to help individuals and businesses navigate complex IRS procedures and safeguard their financial interests<\/span><\/p>

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Whether you’ve been selected at random or because certain elements of your return raised red flags, being audited doesn\u2019t automatically mean you\u2019ve done something wrong. However, it’s essential to understand the process and take steps to protect yourself.<\/span><\/p>

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In this comprehensive guide, we will break down what a tax audit is, how to prepare for it, what you can expect from the process, and how to best safeguard yourself against potential issues. Plus, we’ll introduce you to J. David Tax Law\u2019s specialized services, which focus on tax debt disputes with the <\/span>IRS <\/span>and <\/span>state tax authorities<\/span>, and provide you with the support you need during a tax audit.<\/span><\/p>

 What is a Tax Audit?<\/span><\/h2>

A tax audit is a review of your financial information and tax debt conducted by the IRS to ensure you\u2019ve reported everything correctly.<\/span> <\/span><\/p>

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Audits can occur for several reasons, and it’s important to remember that being selected for an audit doesn\u2019t necessarily mean you’ve made an error or are guilty of wrongdoing.<\/span><\/p>

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While some audits are conducted randomly, others are triggered by inconsistencies in your financial records. Audits can range from a simple correspondence audit (handled by mail) to a more detailed <\/span>field audit<\/span> where an IRS agent visits you in person. Regardless of the type of audit, it\u2019s critical to be prepared and proactive.<\/span><\/p>

Types of IRS Tax Audits<\/span><\/h2>

There are three main types of tax audits that the IRS conducts:<\/span><\/p>

  1. Correspondence Audit<\/span><\/h3><\/li><\/ol>

    The simplest form of audit is where the IRS requests additional documentation or clarification through the mail. <\/span>In 2022, nearly 90% of all IRS audits were conducted via correspondence<\/span>, making it the most common audit type. <\/span><\/p>

    1. Office Audit<\/span><\/h3><\/li><\/ol>

      A more detailed review takes place at an IRS office where you\u2019ll be asked to bring specific documents for review. According to IRS data, about <\/span>5-7% of all audits<\/span> are conducted at IRS offices.<\/span><\/p>

      1. Field Audit<\/span><\/h3><\/li><\/ol>

        The most comprehensive audit is where an IRS agent visits your home, business, or accountant\u2019s office to review your records in person. <\/span>Field audits make up less than 3% of all audits<\/span>, but they tend to focus on more complex tax debt, particularly those involving high-income businesses.<\/span><\/p>

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        Each audit type varies in complexity, but preparation is key regardless of which type you face.<\/span><\/p>

        \"Types<\/span><\/span><\/p>

        Why Do Tax Audits Happen?<\/span><\/h2>

        The IRS uses both random selection and <\/span>algorithms<\/span> to flag debt for audits. The following are common reasons for an audit:<\/span><\/p>