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What You Need to Know About IRS Audits

Dec 9

Although no one enjoys being audited by the IRS, it's important to understand why they do it and how you can better prepare yourself in case it happens. The purpose of this article is to explain the reasons behind audits as well as offer tips on staying compliant with the IRS.

IRS Audit Triggers

The Internal Revenue Service (IRS) conducts audits for numerous reasons. Typically, the agency is looking for discrepancies between what you reported on your tax return and what they believe should have been reported. Here are some common audit triggers that may result in an IRS audit:

• Unusually high deductions – When deductions are unusually high compared to other taxpayers in similar situations, this may trigger an audit. It’s important to make sure all deductions are legitimate and accurate.

Large charitable donations – Donations to charities must be documented properly in order to be deductible, so if large donations are made without adequate paperwork, this could raise flags with the IRS.

Errors on returns – If there are noticeable errors on your tax return, this could prompt an audit from the IRS. Double-check all information before filing your return to avoid any mistakes or omissions.

High income – Taxpayers who earn more than $200,000 per year often get extra attention from the IRS because their income levels place them in higher tax brackets. To help avoid an audit due to high-income levels, make sure that all sources of income are accurately reported on the return.

Preparing For An Audit

If you receive notification that you’ve been selected for an audit, don't panic—be prepared! The best way to prepare is by gathering all relevant documents and records related to your tax return before meeting with the auditor. Gathering as much information as possible helps ensure accuracy during the review process and also shows that you take compliance seriously. Additionally, having a qualified accounting professional present at the meeting can help answer questions posed by auditors and provide helpful input throughout the process.

What To Do During The Audit?

When the IRS conducts an audit your best bet is to remain honest and forthcoming. Don't provide more information than necessary, as this could work against you. Postponing the audit can be a great way to buy more time and increase your chances of success.

Additionally, it's always a good idea to decline hosting the audit at your home or business. Having realistic expectations before heading into an audit will help you stay focused and prepared regardless of what comes up during the examination process. During the actual meeting, try to be brief with your responses while still providing enough detail so that the auditor understands what happened. Leave past returns out of it by only referring back to documents that are related to the year in question, but if you're unable to present records for any reason you can reconstruct them from bank statements or other available evidence.

It's also important to know when it might be possible to negotiate a lower penalty fee or repayment amount -- but take caution, since offering too much information could make things worse for yourself. Lastly, be sure that you understand all of your taxpayer rights before proceeding with an audit so that you are well-informed throughout the entire process.

Should I be worried about being audited?

Individuals who receive an audit letter from the IRS should keep their cool and remember that being selected does not automatically imply wrongdoing. Most audits are chosen randomly, purely based on luck, so even people with impeccable financial records can fall into this unfortunate circumstance. On some occasions, taxpayers may be selected for an audit because of certain discrepancies that have raised a red flag to the IRS. No matter what the cause is, it's always best to approach any audit according to the instructions provided by the agency.


An IRS audit can be intimidating but it doesn’t have to be if you know what triggers them and how best to prepare for one should it occur. Keeping accurate records of all financial transactions throughout the year ensures accuracy when filing taxes and also protects against potential audits down the line. Furthermore, enlisting a qualified accounting professional can provide invaluable assistance during both routine filings and during periods of increased scrutiny such as an IRS audit situation. Understanding why audits happen will help website owners and SEO newbies stay compliant with federal regulations while minimizing any stress associated with such examinations from occurring in the first place!