Business Tax Audits

If the IRS audits your business tax return, the IRS is taking a closer look to see whether the business included all income and took only the deductions and credits allowed by law.

IRS audits usually aren’t random. The IRS selects returns that are the most likely to have errors, based on complex criteria. After you file a return, the IRS usually has three years from that point to start and finish an audit. The IRS starts most tax audits within a year after you file the return, and finishes most audits in less than a year.

The IRS audits returns in three ways:

• By mail (correspondence audit)
• At an IRS office (office or desk audit)
• In person, at your home or business (field audit)

The IRS does most business audits in person (the field audit). These audits can be extensive, often considering all aspects of the business and its owner(s). The field audit will look extensively into the business records and accounting system, and conduct tests to determine the accuracy of income. The average business audit can take a year to complete. Businesses can reduce this time by preparing well for the audit and responding promptly to audit questions and requests.