J.K. Lasser's Your Income Tax 2022

CHAPTER 48If the IRS Examines Your Return

Because the IRS is only able to examine a very low percentage of returns, it follows a policy of examining returns which, upon preliminary inspection, indicate the largest possible source of potential tax deficiency. Various weights are assigned to separate items on each tax return, thus permitting the ranking of returns for the greatest potential error.

This chapter discusses what may trigger an audit and how you can handle an audit if your return is selected for examination.

Also discussed in this chapter are various penalties the IRS can assess if you file an inaccurate return, and the penalties for not reporting your foreign financial accounts.

• 48.1 Odds of Being Audited
• 48.2 When the IRS Can Assess Additional Taxes
• 48.3 Audit Overview
• 48.4 Preparing for the Audit
• 48.5 Handling the Audit
• 48.6 Tax Penalties for Inaccurate Returns
• 48.7 Penalties for Not Reporting Foreign Financial Accounts
• 48.8 Agreeing to the Audit Changes
• 48.9 Disputing the Audit Changes
• 48.10 Offer in Compromise
• 48.11 Recovering Costs of a Tax Dispute
• 48.12 Suing the IRS for Unauthorized Collection

48.1 Odds of Being Audited

The odds are quite low that your return will be picked for an audit. In Fiscal Year 2020 (October 2019 through September 2020), the overall audit rate for individual returns was only 0.63%, similar to the overall audit rate of 0.58% in FY 2019. The audit rates are higher for taxpayers with large adjusted gross incomes and sole proprietors ...