Although the odds of getting audited by the IRS are fairly low, many taxpayers are still concerned it may happen to them. An audit is an investigative procedure that closely examines your financial records to ensure the accuracy of everything reported. If errors were made during the tax return preparation process, you might be obligated to pay the additional amount you owe along with penalties and interest. Here are the answers to a few common questions people have about audits.

What to Know About Tax Audits 

Why are returns chosen for an audit?

In some cases, audits are chosen by random selection or related examinations, which means your return shows involvement in transactions with someone else who’s being audited. However, it’s more common for a specific activity to raise a red flag with the IRS. This may include discrepancies in reported income, high deductions, or inconsistencies from one year to the next.

How are audits conducted?

When the IRS decides to audit a tax filing, it’ll be conducted by mail or an in-person interview. They may ask you to send more information to verify what was reported or schedule a meeting that happens in their office, at your home or business, or at the place of your tax return preparation professional. For in-person audits, it’s generally recommended you hire IRS representation.

What should I do if I receive an audit notice?

After receiving notice, you should begin gathering all the documents used for your tax return preparation and make copies of everything relevant to the audit. Don’t supply the IRS with more information than they’ve requested, and contact your tax advisor to find out what you should expect.

Can I appeal the findings if I disagree?

You have a right to appeal audit findings within 30 days of receiving the IRS’ completed investigation report. You must submit a protest letter to be granted a hearing where you can present the argument to an appeals officer. If the appeal is denied, you can file a petition with the tax court.

Whether you’re looking for quality tax return preparation to reduce your chances of an audit or reliable IRS representation to guide you through the process, turn to James & Associates, CPAs in Wailuku, HI. With over 25 years of accounting experience, they’re proud to provide Maui residents and business owners with personalized service. They’ll work hard to minimize what you owe the IRS and ensure your tax season goes as smoothly as possible. Call (808) 244-2030 to schedule an appointment, or visit them online to learn more about their services.