What is a tax audit?

A tax audit is an official review of an individual’s or business’ taxes. During an audit, the California State Board of Equalization, Franchise Tax Board, or Internal Revenue Service (IRS) will compare an individual’s or business’s tax return with information from other sources. This process is meant to identify any errors or inaccuracies that may have been made when filing or reporting taxes. Taxpayers can be selected for an audit for a variety of reasons. These include being randomly chosen, having unusual or larger deductions, or having a higher reported income than most people in their income range. It is also possible that a taxpayer may have made a reporting error on their taxes, which could trigger an audit. When a taxpayer is being audited, they will typically be asked to provide documentation, such as proof of income, bank statements, and receipts for expenses. It is important to keep up to date records for all income and expenses, as this makes the process much easier if an audit were to occur. Audit results can either benefit or detriment taxpayers, depending on their accuracy. If the audit reveals that a taxpayer has paid more tax than was due, they may be eligible for a refund. However, if the audit discovers underreported income or other errors, the taxpayer may be liable for back taxes with additional penalties and interest.

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What is a tax audit?

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