What is a tax audit?

A tax audit is a process conducted by the Maryland Department of Taxation or the Internal Revenue Service (IRS) to review a taxpayer’s tax information and make sure taxes have been reported and paid correctly. Tax audits can occur randomly, or they can be triggered by certain red flags, like inconsistencies or discrepancies in the tax returns, unusually high or low deductions, or if the taxpayer is in an industry that typically sees a high rate of non-compliance. During a tax audit, an auditor will review specific information related to a taxpayer’s income, expenses, and deductions for a particular year. The auditor may also request additional documentation to confirm the information in the tax return, such as receipts, canceled checks, or bank statements. The auditor may also ask questions about the validity of certain claimed deductions or credits. If the auditor discovers discrepancies or errors, the taxpayer may be required to pay additional taxes, penalties, and interest. In some cases, the taxpayer may even face criminal prosecution if the auditor determines the errors to be intentional. It’s important to remember that a tax audit is an administrative process and does not necessarily imply that the taxpayer has done anything wrong. However, it is important to fully comply with the audit process in order to make sure tax records are accurate and up-to-date.

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What is a tax audit?

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