A tax audit is a formal examination of financial records and tax filings to verify accuracy and compliance with tax laws. Organizations undergo tax audits when authorities review reported income, deductions, and credits to ensure proper reporting. The tax audit definition includes both federal and state examinations. 

IRS tax audit triggers include inconsistent filings, unusually high deductions, missing documentation, or discrepancies between reported income and third-party records. Tax audits may also result from random selection or industry-specific risk factors that require additional scrutiny. 

A tax audit process begins with a notice, followed by document requests and detailed review. Auditors examine records, test compliance, and request clarification. The process concludes with findings, adjustments, or acceptance of filings depending on the accuracy of reported information. 

Tax audits typically review the past three years of filings. In cases involving significant underreporting, audits may extend up to six years. The tax audit statute of limitations depends on the nature of discrepancies identified during the review. 

The duration of a tax audit varies based on complexity, documentation quality, and responsiveness. Most audits take several weeks to months. Delays occur when records are incomplete or require additional verification by tax authorities. 

An income tax audit procedure includes document collection, reconciliation of reported income, verification of deductions, and testing of compliance. Organizations must provide supporting records that validate tax filings and demonstrate adherence to applicable regulations.