Intuit Turbo Tax Level 1 Practice Exam 2025 - Free Tax Preparation Practice Questions and Study Guide

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What does the term 'tax audit' refer to?

A review of financial records by a bank

An examination of an individual's or organization's tax return by the IRS

The term 'tax audit' specifically refers to an examination of an individual's or organization's tax return by the IRS. During this process, the IRS reviews the submitted tax return to verify its accuracy and ensure that tax laws have been complied with. Audits can be triggered by various factors, such as discrepancies in reported income, deductions that are significantly higher than average, or random selection.

This answer captures the essence of what a tax audit is—an official scrutiny conducted by a government agency aimed at maintaining the integrity of the tax system. Understanding this concept is crucial for taxpayers as it helps underscore the importance of accurate record-keeping and honest reporting when filing tax returns.

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A standard procedure for all tax filers

A voluntary check of submitted returns

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