Each year, more than 140 million tax returns are filed with the Internal Revenue Service (IRS). Of these 140 million returns, nearly 1.5 million are audited by the IRS. Taxpayers with adjusted gross income over $200,000 generally are more likely to be audited, as are taxpayers who will have little or no adjusted gross income. Although the likelihood of actually being selected for an audit is relatively low, it is still important for taxpayers to understand what the tax audit entails, the procedures the IRS uses to determine which tax returns to audit, and the IRS process in selecting the outcome of the verification. verify. This way, taxpayers are able to point out common IRS red flags and can significantly reduce their chance of being singled out for a tax audit. A tax audit is an examination of a tax return by the IRS to verify that information, such as income and deductions, is reported accurately. Typically, the IRS evaluates the financial situation of a business or individual to ensure that taxpayers comply with tax laws and report the correct amount of taxes on their tax returns. The IRS goes through the tax audit process by selecting tax returns to audit, conducting the audit, and determining the conclusion of the audit. The IRS uses various audit selection methods, including random selection and computer screening, document matching and related examinations, to determine which tax returns are selected. Random selection and computerized screening occur when returns are selected based on a statistical formula. This method demonstrates that some returns are simply chosen at random, even though an error may not have actually occurred. Document matching is a process used to ensure that documents filed by taxpayers, such as W-2...... middle of paper ...... documentation to support business expenses, resulting in no changes to the return of incomes. This example once again demonstrates that although a tax return may contain some minor errors, providing solid documentation can be of great benefit to a taxpayer being audited. A tax audit can be a long and arduous process for both the IRS and the taxpayer. If the taxpayer is aware of the methods and procedures of the tax audit process and is prepared whenever he or she receives a notification, the process can be less alarming and stressful. Being aware of the many indicators the IRS looks for during your audit can significantly reduce your chances of being audited, as well as always maintaining relevant documents, statements and records. The tax audit not only verifies the correct reporting of information on your tax return, but also helps the IRS ensure the fair treatment of all taxpayers.