“BEING AUDITED BY AN IRS IS A COMMON FEAR AMONG PEOPLE, AND IT WILL MAKE YOU RECONSIDER YOUR TAXES.”
WHAT IS AN IRS AUDIT?
An IRS audit is an examination of an organization’s or individual’s accounts and financial information to make sure the information reported correctly according to the tax law to substantiate the reported amount of tax is accurate.
WHAT ARE YOUR RIGHTS?
As a taxpayer, you have to right to the examine, appeal, collection, and refund processes are explained by ‘Your rights as a taxpayer- Publication 1’. These rights involve:
- A right to polite treatment and professionalism by IRS workers
- A right to top-secret and privacy about tax details
- A right to know why the IRS is inquiring for the information and how the IRS uses it. Plus, what will happen if the requested details /information is not provided
- A right to reconsider disagreements, both within the IRS and before the courts.
WHY THE IRS AUDITS PEOPLE?
The IRS tax audits to reduce the “tax gap.” An IRS audit is random, but the IRS regularly selects taxpayers based on doubtful activities. So, here are seven of the biggest red flags, they are:
- Making math error
- Failing to report some income
- Claiming too many charitable donations
- Reporting too many dropping on a Schedule C
- Deducting too many business expenses
- Claiming a home office deduction
- Using nice, neat, round numbers.
WHAT ARE THE TYPES OF AUDITS?
There are three types of tax audit they are mail audit, office audit, and field audit. Mail audit is the simple tax audit that the tax employees notified and requested the taxpayer to give additional documents on the specified tax return declaration and deductions. An Office audit is the extra procedure to the mail audit, where this kind of audit needs you to visit the local tax department. A Field audit is a deep audit from tax departments where the tax officer inspects your documents and questioning you in-office. Other than this, there are few more audits; they are desk audits, limited audits, and comprehensive audits.
HOW TO IDENTIFY AN IRS AUDIT LETTER?
An IRS audit letter will come to you by certified mail; while opening it will identify your name, taxpayer, form number, employee ID number, and contact details. The first line of the IRS letter may state something like “your income tax return for the year show and show has been selected for examination.” It is more important to respond to the IRS as soon as possible, through a phone call or a response to the audit letter within 30 days. Any late responses will be penalized.
IS THERE ANY NECESSARY TO HIRE A PROFESSIONAL?
While the experts say it is your choice to hire a professional, but many say it can be worth the pay. “It is really important to get an experienced representative in any situation” – Lance Christensen. If you have decided to hire a professional, consider an expert such as an enrolled agent, certified public accountant, or lawyer who specializes in audit representation.
WHAT RAISES A RED FLAG?
No one is thrilled about being audited by the IRS. Even though the IRS has been banged like everyone else, there is still a possibility your return will be flagged for an audit.
The IRS audited only 0.4% of all individual returns in 2019, so your possibility is already pretty slim. Those who were audited never seen IRS as a person; rather, everything was done by mail.
But there are a few red flags it will stop to look at that could raise your odds of getting that feared audit stamp on your return.
WEAKNESS IN REPORTING ALL TAXABLE INCOME: