What Happens in a Tax Audit?

Michael J. Smeriglio has maintained an independent accounting practice in Cos Cob, Connecticut, for more than 30 years. In that time, Michael J. Smeriglio has represented many clients in Internal Revenue Service (IRS) audits. 

Every year, the IRS selects approximately one percent of the population for tax audits. Selected individuals and businesses receive notification via mail, which provides information about what the taxpayer needs to do in response to the audit.

Audits take place either by mail or in an interview with an IRS agent. The majority of audits take place by mail and require the taxpayer to send written documentation of specified tax return elements. This correspondence will then help the IRS resolve any discrepancies in the taxpayer's claimed income or expenses.

In some cases, taxpayers may need to meet with a representative of the IRS. This meeting most often occurs in the taxpayer's home or office, particularly if the audited entity is a small business. Rarely, the IRS may require the taxpayer travel to an IRS office for an in-person interview.

After the IRS has reviewed all documents, the examiner will issue a decision regarding the audited entity's tax obligations. Unresolved audits may result in the examiner's request for an extension, which gives the taxpayer additional opportunities to present documentation. The examiner will ultimately make a decision which the taxpayer may accept or appeal, though only two percent of audited entities choose to appeal.