Have you a received a notice of a tax audit? Are you facing an income tax audit this season that adds to your stress? What is a tax audit? And what are the odds of getting audited on your taxes?
Tax audits are the examination by the Internal Revenue Service or IRS of the tax return of an individual or a company for verification if the financial information if it is correctly reported. This is to uncover fraudulent acts and errors. Though the odds of you being audited is statistically low, there is still a chance.
So, how does the IRS notify you of an audit? IRS will inform you by mail if there are some issues in your tax return filed.
In the following paragraphs we will be discussing the different types of a tax audit, what triggers a tax audit and what will you do if you are confronted with the situation.
The Different Types of Tax Audits
The IRS has three different types of audits mainly the mail, field and office audit.
Mail audit. This is the most straightforward type of review since you are not required to meed the auditor in person. This is when the IRS only request additional documents to support some items on your income tax returns.
Office audit. This type of examination is more in-depth compared to mail audit. You are required to meet the audit officer to answer his or her questions regarding the tax return. During this situation, you may bring accounting personnel or a lawyer.
Field Audit. This the broadest type of examination. The IRS personnel will come to your home, office or place of business to review and ask some documents. This involves a very thorough procedure covering almost all item on your income tax return.
What Triggers Tax Audits?
As taxpayers, you may have potential triggers in your tax return that could attract the attention of the IRS. They have a computerized scoring system that assesses tax deductions and compares the data of the taxpayer as their basis for audit.
Problems may arise if your sales or income is not wholly reported and if there are out of ordinary losses recorded. There are instances when even large charitable deductions may trigger an audit.
If IRS determines that you have an offshore bank account, their auditor may come after you. They are more keen on businesses that have a fast conversion of cash like convenience stores and restaurants.
However, if you receive a notice of audit, no need to worry much since a majority of tax audits were resolved through correspondence.
What Will You Do If You Receive a Tax Audit Notice?
If ever you have triggered red flags and attracted the attention of the IRS for an examination, what will you do? We have here some tips for you to learn and follow.
Do not hesitate and communicate immediately with the IRS. Respond to the wishes of IRS personnel since it is part of their job to collect taxes for the state government.
Consult an attorney. Do not represent your self to avoid further issues. Always tolerate the process since you cannot expect that an audit would end quickly. It may be over six months or more.
Call Us to Assist You
Now that you are familiar with what is a tax audit, exercise your rights. One of these rights is to have an authorized representative like lawyers.
Hiring a tax attorney can help you a lot in surviving the examination since they are well-versed with the tax law. If you are in Sacramento, California, you may call Rex Halverson and Associates firm for assistance and give you legal advice. They offer a free initial consultation.
Call us now to assist you with your tax audits.