What You Need to Know About IRS Audits
The dreaded audit. If you’ve arrived at this page, then you probably have some questions, and you might even be a little worried. Take a breath and know that IRS audits don’t have to be a nightmare!
What is an IRS Audit?
The IRS audits individual and business taxpayers to analyze areas including bank statements, tax returns, and other financial information to ensure that taxes have been filed and paid in alignment with the rules the IRS sets forth. A VERY small portion of tax filers are audited each year – right around 1%. The IRS can, however, audit as far back as three years, and if a problem is found, they have the right to request an audit at up to six years.
How are Taxpayers Chosen for IRS Audits?
There are a lot of rumors floating around regarding the reasons why audits happen. In addition, there are scams that lure victims in by telling them they’re being audited. More on that in a moment…
Taxpayers can be chosen for IRS audits in just a few ways, actually. Most of the time, computer screening and random selection determines who will get audited. There is a formula used by the IRS in which tax returns are chosen for auditing based on certain criteria, which means that tax returns can get flagged for certain things.
Tax returns can be flagged if you haven’t reported all the income you made. For example, if you switched jobs halfway through the year, you might have reported your income from the new job. If you forgot to report income from the first job, however, the IRS will receive your tax information from the employer. Then, you’ll get flagged.
If you file a Schedule C for your business income, you could be more susceptible to being audited. The IRS looks closely at deductions, specifically when they are at a high ratio in comparison with income earned. Also, if you earned more than $200,000, know that you’re at a higher risk of being audited.
Sometimes, you’ll get audited simply because someone you do business with is being audited.
What’s the IRS Audit Process Like?
First, you will receive a notification. If you receive a phone call from the IRS, it is a scam! The IRS will ALWAYS notify you of an audit via the mail.
The audit itself can be conducted either in person or through the mail. The IRS will give you a specific set of instructions, and you’ll want to closely follow them. You’ll be asked to forward documentation supporting deductions or credits you’ve claimed, as well as the same documentation for income.
The keys to a successful audit are accuracy and promptness.
That’s Where We Come In.
Audits don’t have to be terrible. Our team can work one-on-one with you from the moment you receive a notification of audit through the closing of the audit, ensuring the best result possible. Contact us today!