The IRS often wants to verify filing status, dependents, and other return items before sending your refund. These are often mail and office audits related to questionable items on your return.
The most comprehensive IRS audits can start later. These are called field audits , when the IRS visits you or your business. Dealing with the IRS in an audit can be difficult. The best course of action is to respond on time, thoroughly, and advocate your tax return position. One complete response, sent on time to the IRS, will avoid confusion and lead to the best results. IRS audit procedures can be complicated and almost impossible to navigate successfully. You should expect to pay a few hundred dollars for a mail or office audit for a tax pro to represent you.
Field audit representation is likely more expensive because your tax professional will be spending a lot of time with the IRS. Or get help from a trusted IRS expert. Learn what the IRS is looking for during an audit, the steps you should take to prepare for an IRS audit, and when it's best to get expert help.
Convenience stores, restaurants, laundromats, car washes, and beauty salons are all more likely to be audited. Errors in addition or subtraction will likely get caught, flagging your return for an audit, even if the mistake is in the favor of the IRS. Since tax software does all of your calculations for you, it has the distinct benefit of protecting you from this particular red flag. Many business owners will have to file a Schedule C to report business income as part of their individual tax returns.
This is true of sole proprietorships, which make up the bulk of small businesses. Schedule C will show the profit or loss of your company, but also land your return in the more-likely-to-get-audited pile. As described in part three of our tax series, Small Business Tax Deductions , if you regularly work at home in an area exclusively dedicated to your business, you are allowed to deduct some of the cost of that space from your income tax.
Even businesses that show a loss instead of a profit have to file tax returns. Drop off the face of the earth with the IRS for a couple of years, and when you show up again, the tax man will likely invite you in to explain things.
Likewise, you could be audited if you show a huge increase from year to year. Make sure that your expenses make sense in proportion to your business income.
Keep your receipts and indicate the business purpose each expense is for. This is another area some people take advantage of, so the IRS tends to look carefully. Tax Strategy. Tax Credits and Deductions. Retirement and Your Taxes. Tax Filing. Tax Refunds. Tax Security. Table of Contents Expand. What Is a Tax Audit? What Can Trigger a Tax Audit? Statute of Limitations.
The Bottom Line. Key Takeaways Your tax returns can be audited after you've been issued a refund. Only a relatively small percentage of U. The IRS can audit returns for up to three prior tax years and in some cases, go back even further. If an audit results in increased tax liability, you may also be subject to penalties and interest. Reviewing your return carefully before filing can help to minimize the odds of being audited.
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Related Articles. Partner Links. An amended return is a form filed in order to make corrections to a tax return from a previous year. Individual Income Tax Return Form X is used by taxpayers who need to amend an error in a previously filed annual federal tax return. When Is Tax Day? Tax Day in the U. The deadline is April 15 in , as in most years. Form is an IRS document that is used to request exact copies of prior years' tax returns.
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