Tax audit refers to the examination of the taxpayer’s financial records that the chartered accountant conducts following section 44AB’s requirements. There are three types of Tax Audits. They are as follows –
Office Audit
An office audit is a physical inspection carried out at a nearby IRS office. An office audit may require you to provide particular documentation, such as your company’s books and records or your bank statements and receipts. Additionally, you have the right to be represented at these meetings by an accountant or attorney.
Field Audit
The field audit is the IRS’s most thorough kind of investigation. When this occurs, an IRS agent will audit your records at your residence or place of business. Field audits are typically undertaken when the IRS has more than simply a few deductions to investigate.
Correspondence Audit
Correspondence audits are tax audits that the Internal Revenue Service conducts over the phone or by mail. In the correspondence audit, the IRS writes to the taxpayer and asks them to supply any missing documents or other records that can shed light on their tax returns. The only thing the taxpayer needs to do is mail the necessary paperwork.
What are the main objectives of a tax audit?
The objectives of tax records are as follows –
- To make sure the assessee’s books of account as well as other records are accurate.
- Assuring conformity with the Act’s different requirements and providing the Income Tax Department with the pertinent information required by the Act, including depreciation allowed under the Act.
- To properly present accounts to tax authorities and streamline the implementation of tax laws.
How long should you keep your tax records in case of an audit?
It is advisable by the IRS that you keep your tax records in case of an audit for 3 years. A tax audit helps in the verification of your income accurately. It assists the authorities in ensuring that your company complies with the tax regulations established by the Income Tax Act of India. Hopefully, this article has given you some information about Tax audits.
