{"id":2312,"date":"2016-07-14T07:00:53","date_gmt":"2016-07-14T12:00:53","guid":{"rendered":"https:\/\/taxprocenter.proconnect.intuit.com\/?p=2312"},"modified":"2021-05-18T11:52:28","modified_gmt":"2021-05-18T16:52:28","slug":"how-audits-are-conducted-by-the-irs","status":"publish","type":"post","link":"https:\/\/accountants.intuit.com\/taxprocenter\/tax-law-and-news\/how-audits-are-conducted-by-the-irs\/","title":{"rendered":"How Audits Are Conducted by the IRS"},"content":{"rendered":"

If you\u2019ve helped an individual or business client prepare for an audit, then you probably have played the roles of friend, nursemaid and psychiatrist, but more than anything else, you\u2019ve used your knowledge of tax and the IRS to ensure your client understands many of the somewhat-complicated components associated with an audit.<\/span><\/p>\n

Whether you have this experience or have yet to navigate the audit process for a client, here\u2019s a primer on how audits are conducted the IRS:<\/span><\/p>\n

An IRS audit is a review or an examination of a taxpayer\u2019s accounts and financial information, in order to verify that information is properly being reported, tax laws are being followed and the amount of tax reported is substantially accurate.<\/span><\/p>\n

Tax returns are selected for audit by the IRS using the following three methods (an audit does not necessarily suggest an error has been made):<\/span><\/p>\n

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  1. Random selection and computer screening:<\/b> sometimes, returns are selected based solely on a statistical formula.<\/span><\/li>\n
  2. Document matching:<\/b> occurs when payer records, such as Forms W-2 or Form 1099, do not match the information reported.<\/span><\/li>\n
  3. Related examinations:<\/b> returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit.<\/span><\/li>\n<\/ol>\n

    An audit may be conducted by mail, or through an in-person interview and review of the taxpayer\u2019s records. The interview may either take place at an IRS office (office audit), or the taxpayer\u2019s home, place of business or accountant\u2019s office (field audit). The IRS will notify you about an audit by mail or telephone, and will indicate the records that are needed. A letter from the IRS will follow a telephone contact, and the IRS does not notify via email.<\/span><\/p>\n

    Taxpayer\u2019s rights during an audit include the following:<\/span><\/p>\n