What Is a Tax Auditor and What Do They Do?
Demystify the role of a tax auditor, understand the audit process, and know your taxpayer rights for confident tax compliance.
A tax auditor examines financial records and tax returns to ensure compliance with tax laws. They verify reported income, deductions, and credits, confirming individuals and businesses fulfill their tax obligations. This process helps maintain the integrity of the tax system.
The Role of a Tax Auditor
Tax auditors review financial statements, income declarations, expense records, and claimed deductions or credits. They confirm adherence to tax regulations established by governmental bodies. Employed by federal, state, and local tax authorities, their objective is to ensure fair and accurate collection of tax revenues.
Auditors examine various financial documents, including bank statements, sales receipts, vendor invoices, payroll records, and general ledgers, alongside supporting documentation for reported income and expenses. Their work identifies discrepancies, errors, or non-compliance, ranging from unintentional mistakes to deliberate underreporting. These examinations help maintain public confidence in the tax system and promote equitable contributions.
Understanding the Audit Process
A tax audit begins with a formal notification sent to the taxpayer. This notification informs the taxpayer their return was selected for examination, specifies the tax year, and outlines required documentation.
Audits can be conducted through various methods, each differing in interaction and location. A correspondence audit is conducted by mail, with the auditor requesting specific documents or explanations. An office audit requires the taxpayer to bring their records to a tax authority office. Field audits are more comprehensive, involving the auditor visiting the taxpayer’s home or business to examine records on-site.
Once the requested information is received, the auditor reviews the submitted documentation against the tax return. This review often involves comparing reported figures to supporting documents, verifying the legitimacy of deductions, and ensuring all income sources are properly accounted for. The auditor may ask follow-up questions or request additional clarification if inconsistencies or missing information are identified. Upon completion of the review, the audit can result in one of several outcomes, including no change to the tax liability, proposed adjustments that may lead to additional tax due or a refund, or an agreement on the findings.
Taxpayer Rights During an Audit
Taxpayers undergoing an audit possess fundamental rights that ensure fair treatment and due process. One such right is to receive professional and courteous treatment from all tax authority personnel.
Taxpayers also have a right to privacy and confidentiality concerning their tax information and financial records. Tax authorities are obligated to protect this sensitive data. Individuals have the right to be represented by a qualified professional, such as an attorney, Certified Public Accountant (CPA), or Enrolled Agent (EA).
Should a taxpayer disagree with the findings or proposed adjustments made by the auditor, they retain the right to appeal the decision. Taxpayers also have the right to understand why specific information is being requested and how that information will be used in the audit process.