What if this is the year...

What if this is the year that you are notified by the IRS that you will be audited? Many begin to worry instantaneously upon notification; others that are well prepared and have experienced accountants welcome the IRS. Nevertheless, it is good to be knowledgeable about IRS audits. The information below will explain several things involving an IRS audit that you may want to know. 
What is an IRS audit? An IRS audit is a review of an organization’s or individual’s accounts and financial information. Another way to look at an audit is a discussion and review of the individual’s or business’s financial situation to ensure taxpayers are complying with the tax laws and reporting a substantially correct amount of tax.
How are audits selected by the IRS?
Selecting a return for audit does not always suggest that an error has been made. Returns are selected using a variety of methods, including:    
• Random selection and computer screening - sometimes returns are selected based solely on a statistical formula. 
• Document matching – when payer records, such as Forms W-2 or Form 1099, don’t match the information reported.     
• Related examinations – returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit.
What should you do if I receive a letter notifying me of an audit?
You should review the letter for actions required by you. Your letter will indicate if you need to contact the IRS to schedule an appointment or if you will need to mail information to the IRS to review by a set date.
What records are needed for the audit?
A written request for specific documents needed, will be provided to you. The law requires you to retain records used to prepare your return. Those records generally should be kept for three years from the date the tax return was filed.
What audit determinations may be determined?
An audit can be concluded in three ways:   
• No change: an audit in which you have substantiated all the items being reviewed and results in no changes. 
• Agreed: an audit where the IRS proposed changes and the taxpayer understands and agrees with the changes.     
• Disagreed: an audit where the IRS has proposed changes and the taxpayers understands, but disagrees with the changes.
/posted by Lucas Shepherd