Tax audits have been making headlines in recent week in light of the presidential debates. For instance, people have been discussing candidate Donald Trump’s explanation that he cannot release his tax returns because he is currently being audited. This has led to people talking about audits and what they mean, even now when people are generally not thinking about their own tax returns.
Discussing the topic of audits usually brings a groan or anxious sigh from people. They know that audits can be unpleasant, but some don’t understand what this process actually is, why it is preferable to avoid one and what an audit can tell us. In this post, we will discuss some of these basic details of an audit.
To begin with, an audit occurs when the IRS examines your tax returns. It will look over deductions, payments, charitable donations, tax documentation and all other financial statements to ensure a person’s — or a business’ — tax returns are accurate and thorough.
There are many reasons why people generally try to avoid audits. Not only can it be intimidating to have your records pored over by the government, it can also be incredibly stressful to anticipate and respond to potential errors or oversights that might be identified.
Further, people can be afraid of what might be found when the IRS goes through a return more closely. An audit can reveal evidence of fraud, embellished or minimized accounting as well as any unfavorable tax avoidance practices that may give people pause, especially if a person is the head of a company or in the public eye.
Hopefully, these very brief and basic explanations about audits can help you recognize why audits can be so stressful and why it is generally best to have some legal guidance should you learn that you are being audited. If you have more specific questions or concerns about IRS audits, you can consult an experienced tax law attorney.