You will face a tax bill if you are audited and the IRS finds out that you have understated income, had an inaccurate tax return, or took improper tax deductions or credits. Usually the penalty is 20% of the total understatement of tax. The gross valuation misstatements may even get as high as 40% in certain cases. There are different types of penalties that fall under this category. An example would be the IRS Negligence Penalty which includes failure to keep records to support credits or deductions claimed and failure to include income on your tax return that was clearly shown in an information return to name a few. This also includes failure to reasonably check the accuracy of a deduction or credit that appears to be so good it can’t be believable and if you continue to make the same mistakes with specific items even after you’ve been notified. Substantial understatement penalty occurs when you understate your tax liabilities by more than $5,000.
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.