Tax Audit: Definition, Example, Explanation, and Types


A tax audit is the official examination or audit of the tax department of the tax return that declares by taxpayers as required by law.

Different countries and different jurisdictions may have different laws and requirements due to the tax audit process.

In general, taxpayers declare their tax returns monthly and annual to the tax department; however, just because declaring tax returns to the tax department does not mean that taxpayers have completed their obligation.

Taxpayers may require by the tax department to have their documents reviewed by tax officers.

There are many different kinds of tax returns and the term that is used to call those terms may be the difference from one country to another.

And before visiting the taxpayer office, or requesting additional documents and clarification, the tax department should normally notify taxpayers. The following are the types of taxes audit.

Types of tax audits:

1) Mail Audit:

This is the simple tax audit that the tax officer notified and request the taxpayer to provide additional documents or clarification on the certain tax return declaration and deductions.

For example, you or your company declare to deduct charity expenses that are subject to a tax deduction.

Or example, you or your company declare to deduct charity expenses that are subject to the tax deduction.

Sometimes, when the tax office review your tax deduction and they suspect sometimes may go wrong, the tax officer may request additional documents or clarification to confirm if the deduction is correctly taken into account.

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If the tax officer is satisfied with the documents or explanation, then they will stop their procedure here.

And if they are not satisfied, then they may perform other procedures or audits like office or field audits.

That means they may ask to you explain to them in person at their office or they come to visit you at your own office or home.

2) Office Audit:

It is the additional procedure to the mail audit where this kind of audit needs you to visit the local tax department.

If you are invited to visit the tax department, you may need to bring additional documents as well as be ready for their questions.

In practice, you already have the clue about what they are seeking because you already just got a mail audit.

Before visiting them, you should make sure that the information and documents that they need are ready. You may need to ask a lawyer or accountant to accompany you.

3) Field Audit:

A field audit is a depth audit from tax departments where a tax officer examines your documents and questions you onsite.

This kind of audit is happening annually or only if there is special suspicion from the tax department on your declaration.

If you never receive such an audit, it would be your benefit to have a tax professional agent to help you out.

Other types of tax audits:

Tax auditing is normally performed by the government tax officers and the term used to call tax audit is different from country to country.

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The following are the tax auditing that is similar to the tax audit that we discuss above.

4) Desk audit:

In this kind of audit, the tax officer reviews the document that taxpayers submit to them monthly or annually as per tax law requirements.

For example, the entity is required to file tax returns monthly including salary tax, withholding tax, prepayment profit tax, and other related taxes.

These documents and tax returns will have to review by the tax office to assess if additional information, documents, or payments are required.

In case, tax officers suspect some time with your tax return, then they will perform limited tax. A desk audit is sometimes similar to a mail tax audit.

5) Limited audit:

A limited tax audit is an in-depth over-desk audit. This kind of audit is normally performed at the site or office of taxpayers to examine and inquire additional information from taxpayers for specific areas like salary tax or withholding tax.

6) Comprehensive audit:

A comprehensive tax audit is the same as a field audit. Tax officers will inform taxpayers about their visit and the types of documents that they will review and they want taxpayers to be ready for their review.

This is comprehensive so there are many areas that will review. The period of tax return that they will review is normally specific in their notification.