When Is Audit Season and What Triggers an Audit?

A tax audit is an examination of an individual’s or organization’s financial information to ensure accuracy and compliance with tax laws. While an audit can occur at any point, there are common periods when tax authorities, such as the Internal Revenue Service (IRS), are more active in initiating these reviews. Understanding these periods and the factors that might lead to an audit can help taxpayers prepare and maintain proper records.

Identifying Common Audit Periods

The concept of an “audit season” differs from the fixed tax filing season; it is not a specific, mandated timeframe. Many audits often commence several months after the primary tax filing deadlines, typically in the late summer or fall for individual tax returns. This timing allows the IRS to process filed returns and identify potential discrepancies.

Audits do not exclusively target the most recent tax year; they can extend to returns filed in previous years. Generally, the IRS has a three-year statute of limitations to initiate an audit from the later of the tax return’s due date or the date it was filed. For instance, if a tax return for the 2022 tax year was filed on April 15, 2023, the IRS typically has until April 15, 2026, to conduct an audit.

However, this three-year period can be extended under specific circumstances. If a substantial error is identified, such as an underreporting of gross income by more than 25%, the audit period can extend to six years. In cases of suspected fraud or if a tax return was never filed, there is no statute of limitations, allowing the IRS to audit indefinitely.

Understanding Audit Triggers

An audit can be triggered by various factors, often signaling potential inaccuracies or inconsistencies on a tax return. A common reason for an audit is a mismatch between the income reported by a taxpayer and the income information received by the IRS from third parties, such as W-2s from employers or 1099s from financial institutions. Automated systems within the IRS compare this data, and any discrepancies can lead to further review. For example, if a 1099 form indicates income that was not reported on a tax return, it can prompt an audit.

Certain deductions or credits claimed on a tax return can also raise flags, particularly if they are unusually high relative to the taxpayer’s income or industry norms. This includes large charitable contributions that appear disproportionate to income, significant business losses reported year after year, or claiming 100% business use of a vehicle. Similarly, the Earned Income Tax Credit (EITC) often receives additional scrutiny due to historical fraud cases.

Mathematical errors or clerical mistakes on a tax return, although seemingly minor, can also lead to an audit or at least a notice from the IRS proposing corrections. While some audits are initiated through random selection to ensure overall compliance across the tax system, many are specifically targeted due to these identifiable indicators of potential non-compliance. Maintaining thorough and accurate records is important to support all reported income and claimed deductions.

The Audit Process

Once a tax return is selected for an audit, the taxpayer will receive an official notification, typically a letter sent via mail. This letter, often referred to as a Notice of Audit or Examination, will specify the tax year(s) under review, the type of audit, and the particular issues or items the IRS wants to examine. The IRS does not initiate audits through phone calls or emails, so any such contact should be viewed with suspicion.

There are generally three main types of IRS audits. A correspondence audit is the most common and is conducted entirely by mail, usually for simpler issues requiring clarification or documentation for specific deductions. An office audit involves a face-to-face meeting at a local IRS office and is typically for more complex issues, such as itemized deductions or business profits and losses. The most comprehensive type is a field audit, where an IRS agent visits the taxpayer’s home, business, or accountant’s office for an extensive review of records.

Upon receiving an audit notice, taxpayers are usually given about 30 days to respond and begin gathering all relevant documentation, such as receipts, invoices, bank statements, and supporting records for the items being questioned. Taxpayers have the right to represent themselves or to be represented by a tax professional, such as a Certified Public Accountant (CPA) or tax attorney, during the audit process. After the examination, the IRS will present its findings; if discrepancies are found, the taxpayer may agree to proposed adjustments, or they can disagree and pursue an appeal within the IRS.