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Updated: 3/27/2003 1:09 pm
An audit is an investigation by the Internal Revenue Service, or IRS (I-R-S), to decide if you've paid the appropriate amount of taxes. In order to do this, the IRS must verify that the information you provided on your federal income tax return is correct. The IRS can audit you based on a computer-generated score indicating a high probability of inaccurate amounts on your tax return. It can also audit you because of tips from external sources of information, such as published materials, public records, or individual reports. An audit can be conducted by mail or in your home or office by an IRS agent. During an audit, it's your responsibility to prove that all the information in your tax return is accurate. Figures you might need to prove include the amount of your income, exclusions, exemptions, credits, and deductions. Once the auditor has reviewed your documentation, one of several decisions will be made regarding your taxes. There may be no change at all, the government may issue you a refund, or the case may result in an assessment. An assessment is a decision by the government that you owe taxes. In most cases, assessments must be made by the IRS within three years of the date you originally filed the taxes. For this reason, it's a good idea to keep your tax records for at least three years, if not longer. The IRS has an indefinite period of time to audit you if your claim was false or fraudulent.

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