What Triggers a Tax Audit?
Common audit triggers include unreported income identified through mismatched 1099s and W-2s, unusually large deductions relative to income, a home office deduction, large charitable contribution claims, consistent business losses, high cash-based businesses, and round-number deductions that suggest estimates. High income also increases statistical audit risk. Random selection occurs at any income level.
What Are the Different Types of IRS Audits?
A correspondence audit is the most common — the IRS sends a letter requesting documentation for a specific item. An office audit requires you to bring records to an IRS office. A field audit is the most intensive, with an agent visiting your home or business. Most individual taxpayers who face audits deal only with the correspondence variety, resolvable by sending supporting documents.
How Should You Respond to an IRS Audit?
It's generally recommended not to ignore IRS correspondence — response deadlines are strict, and failure to respond leads to automatic assessments. Reviewing the notice carefully, gathering the specific documents requested, and responding promptly are important steps. For complex audits or large amounts at stake, many people choose to hire a CPA, enrolled agent, or tax attorney for representation. You have the right to appeal any IRS determination.
Frequently asked questions
How long does the IRS have to audit my return?
The standard statute of limitations is three years from the later of the return's due date or filing date. The IRS has six years if you omit more than 25% of gross income, and there is no limit if you file a fraudulent return or fail to file at all.
What should I do if I can't find all my records for an audit?
Reconstruct what you can from bank statements, credit card records, and third-party documents. Contact your employer, financial institutions, or clients for copies of W-2s, 1099s, or payment records. The IRS accepts reasonable reconstruction efforts — document your methodology clearly.