How to Avoid an IRS Audit

For many taxpayers, the possibility of an IRS audit can be intimidating. While most taxpayers will never face an audit, it’s essential to understand what triggers them, how the process works, and what steps you can take to prepare.

What Is An IRS Audit?

An IRS audit reviews an individual’s or business’s financial information and tax returns to ensure accuracy and compliance with United States tax laws. The IRS conducts audits to verify that taxpayers have correctly reported their income, deductions, and credits.

Audits can be triggered randomly, by suspicious activity, or due to discrepancies found in tax returns.

While audits are not all that common (580,000 audits were completed in 2023), they can be stressful and result in paying more than expected in taxes and penalties.

How To Avoid An Audit

Ahad Ali, CEO of Ahad&Co, gave Newsweek numerous pointers on how to avoid a dreaded audit.

Ali said that, most importantly, taxpayers should be careful to report all their income and keep up-to-date records.

“Try not to exaggerate your expenses and deductions,” he said, as the IRS can detect if there is an unusually high amount of these. Ensure you correctly claim any dependents: for example, if you have a child who doesn’t live with you, the IRS will likely contact you to provide evidence.

“We do see a lot of audits when it comes to getting the Earned Income Credit because that is a low-income credit, and it is a large amount that helps you get a very big refund,” Ali said.

He advises that, in any case, the best option is to get an accountant to review your filing to avoid any unwanted surprises.

“An audit is a nightmare, and it costs money—you’re probably going to pay a penalty and the interest,” Ali said.

What Should I Do If I’m Audited?

If the IRS selects you for an audit, respond promptly. The IRS contacts taxpayers by mail to inform them they have been selected.

From there, audits are conducted by mail or in-person interview to review your records. The interview may be at an IRS office, taxpayer’s home, place of business, or accountant’s/representative’s office, which is known as a field audit. An IRS employee will go through your returns and request any missing documentation.

Taxpayers also have the right to appeal audit findings if they disagree with the IRS’s conclusions.

“The length varies depending on the type of audit; the complexity of the issues; the availability of information requested; the availability of both parties for scheduling meetings; and your agreement or disagreement with the findings,” the IRS explains on its website.

An audit may find there should be no change on your return, you owe taxes, or even sometimes that the IRS owes you a refund.