Accounting Articles > IRS Audit:

What is an audit?

By definition, an Audit is an examination of claims.

The numbers that are put on either an Income Tax Return or a Payroll Tax Return are claims.

For example, we claim that we had $1,000,000 in sales. The Internal Revenue Service might examine that to make sure that you didn't have $2,000,000 in sales to see if you were guilty of evading income tax on the additional $1,000,000. Your Payroll Tax Return claims that in a particular quarter you had $35,000 in payroll. The Internal Revenue Service might audit that to make sure that you didn't have $50,000 in payroll because you were treating $15,000 of your employees as independent contractors.

In the examination, they need to see source documents that are by definition untainted and evidential. The documents must come from their source, such as a canceled check from a bank or a receipt from a vendor so that they will be considered evidence. If you have a had chance to change them, then they will be considered tainted, and are non-evidential.

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