How Thorough Are IRS Audits?

How Thorough Are IRS Audits? Well it depends so as I've explained previously the IRS has very limited resources and they're not there to waste time however once the IRS has you under examination it's not like they're just gonna look at one particular issue and then go away unless you have like a super technical legal issue that is the reason that you get got audited like for example if you're running a captive insurance company they may not be concerned about your ordinary and necessary business expenses they're going to go after. The captive insurance company so IRS audits tend to be generally pretty thorough because what happens is the auditor is operating off a checklist and so the auditor want to make wants to make sure that when they're doing an examination they're actually examining it so generally what happens is the I the auditor will spot a couple of different categories they'll look at a couple of expense categories they'll look at a couple of income categories they'll do a bank reconciliation something like that and then if that comes out okay then the auditor is not going to dig any deeper if it doesn't come out okay then the auditors gonna dig down and so what we refer to when an auditor digs down is sometimes they engage on a fishing expedition which is where they'll throw a whole bunch of things out there and see what's tax but then the other thing that they can do is that they find an error they'll start digging into every and they'll use the inaccuracy in one category to open up all the other categories on the return and go digging through tha, so you want to try to avoid that situation if you can but just understand that particularly if you've been assigned to a field agent and that person is either coming out to your house or coming out to your business that person's gonna do their job and they're going to be pretty thorough with their examination.


Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law