What Is A Tax Audit?

Many people who file their taxes on time and make payments to the IRS

believe that they will never come under scrutiny by the tax office because they are doing everything right. However, a tax audit can affect anyone and can be carried out on your tax return even if you filed on time and are up to date on all of your taxes.

Tax AuditS

In short, a tax audit is a procedure where a tax official will go through your tax return carefully, scrutinizing each line and section of your return. There may, of course, be no problem with the return and that can be the end of the matter.

On the other hand, the tax official may find something that he or she believes is a mistake or needs to be rectified. The tax officer may also contact you to ask you to provide documentation or supporting evidence of some of the things you have put in your tax return following the audit.

Tax audits can take place in a number of ways, and there are three main types of audit, which includes the office, field and correspondence audit. These relate to where and how the audit takes place. In many cases, the audit used is a correspondence one where the auditing all takes place via mail.

In the case of a field audit, a tax official would visit your home or office to carry out the inspection and verify the data on your return. Finally, with an office audit you would go to the examiner’s office with your supporting evidence and any other details that you have been asked to provide.

What Triggers an IRS Audit?

An IRS audit is something that most people dread being at the center of and in short you could find yourself being audited by the IRS even if you are someone who always files their returns on time and makes their payments to the IRS on time. Of course, an audit doesn’t mean that you will be in trouble or owe more money. However, nobody really wants the hassle of being audited by the IRS so it is important to remember that there are certain red flags that can trigger this procedure. By making yourself aware of these you can help to reduce the chances of being audited.

Mistakes

If you make silly and avoidable mistakes on your tax return you could find that this triggers an audit. This is why you should always check your return and ensure that all the data and figures on there are accurate.

Dishonest information

You stand more of a chance of getting noticed and audited if you attempt to lie or provide inaccurate information on your tax return, which is something that is a particular issue for higher income earners. Make sure that you are honest in the information you provide and that way you won’t have to worry even if you are audited.

Method of filing

You can reduce the chances of an audit trigger simply by filing your return online, as the IRS states that there are less likely to be mistakes with returns that are filed using this method.

Unrealistic deductions

Another red flag that could trigger an IRS audit is a return with seemingly unrealistic deductions on it. With this in mind, make sure you are honest and accurate when it comes to your deductions rather than trying to add everything you can on to your return.

What Do I Do When I Get Audited By the IRS?

Although most of us hope that we will never be audited by the IRS, it could and does happen. No matter how unlikely it is that you will be audited based on statistics, you never know when this could happen and it is important to be prepared. One thing you should whether or not you are being audited by the IRS is maintain accurate records of relevant documents, invoices, receipts, etc. as this is something that could be crucial if at some point you are audited.

What Do I Need When the IRS Audits Me?

If you do find out that the IRS is going to be auditing you, it is a good idea to look through your tax return thoroughly so that you can refresh your memory with regards to the information on the return. Once this is done, you should make sure you organize your documentation and records so that you have everything to hand to provide the IRS with supporting evidence for everything on your return in the event that they ask for supporting evidence.

Another thing you may want to consider if you are particularly worried or uncomfortable about the audit is hiring the services of a public accountant. These professionals can prove invaluable in helping you to get prepared and ensuring you have exactly what you will need to keep the taxman happy. In cases where the audit is being carried out at your business premises, you may want to advise staff not to talk about the business with IRS staff and to direct all enquiries to you or a designated member of your company.

What are the Chances of Receiving a Tax Audit?

Generally speaking, the chances of receiving an audit vary depending on income level and filing type. There are many different factors that are taken into consideration when determining if the IRS is going to audit. For the most part, the odds that you would be picked for a tax audit is extremely low each year. However, the IRS does typically audit individuals with higher income more so than those with low and average levels of income. I guess you could say the old saying, “more money, more problems” would be the best way to describe being audited by the IRS. This is because they are limited in the resources that they use to go after people and logically speaking it would make more sense to go after people who make more money. People with higher income also have things on their tax returns that create red flags than individuals with lower income.

How Can I Avoid IRS Audits?

IRS audit penalties are the worst. It is in your best interest to avoid these at all cost. There are a few things that can be done in order to avoid audits. First and foremost, be honest. Make sure you tell the truth, the whole truth, and nothing but the truth to the IRS. If you are lying, the IRS will most likely catch you and I can guarantee you it will not be pleasant. Also you want to make sure you use a tax software program or tax professional to file. This is the easiest way to avoid errors and make sure all calculations are correct. A tax professional will more than likely use a tax software program and by using the program it will make sure that your return is complete before you file. Don’t use round numbers because it is not common to have an investment return of $1,000. Using round numbers is a fast way to get your return alerted for an audit.

Who Does the IRS Audit? An IRS audit is something that many people find themselves having to go through and although it may seem like a very daunting process is it often pretty straightforward providing you have been accurate and honest with your tax return.

This is an audit that is carried out by an official from the IRS or what is often referred to as an examiner, who will go through your tax return with a fine tooth comb as part of the audit.

Once the IRS examiner has carried out the audit, you may be asked to rectify or explain certain things on your tax return or you may be asked to provide supporting evidence and documentation relating to certain things that you have put on your tax return. It is the job of the IRS auditor or examiner to pick up on any potential discrepancies on your tax return, such as information that is clearly inaccurate or information that does not seem to be accurate. This could be anything from a simple mistake in figures you have entered through to unrealistic information relating to deductions.

The examiner that carries out the audit on your tax return may carry out the procedure using one of a range of methods. This includes the correspondence audit, which is carried out by post, the field audit, which is carried out at your home or office, or the office audit, which is carried out at the examiner’s office. In many cases, it is the correspondence audit that is carried out but this is something that the IRS examiner will advise you of, if and when your return is selected for audit.

“Greg, Lance, Stephanie and team are some of the most amazing people I’ve had the pleasure of working with! They are on point when it comes to helping our crew out with our IRS tax issues! They saved our company and the owner so much money already! Thankful for Levy & Associates!!”

– Erica Dell

“I had an IRS issue that no one was able to help me with. Someone recommended that I call The Levy Group so I did. They helped me with resolving a very difficult situation. I very thankful with what they were able to accomplish.”

– David Carpenter

Contact Levy & Associates for Dependable Tax Audit Services

Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.

There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.

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