IRS Audit

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IRS Audit

Post by Rajneet » Sat Feb 29, 2020 12:23 am

The IRS audit is an examination of individual/business accounts and financial information to ensure correct income and expenses were reported on the tax returns. The audit is conducted to ensure the correct amount of tax was paid to the government.
The IRS generally can audit you for up to three years after you file your tax return. At times, the IRS may audit for six years or longer if more than 25% of income is omitted from the tax return. The IRS legally requires taxpayers to keep all records used to prepare tax returns for at least three years from the date you file your tax return. However, it is recommended that records be kept for up to six years.
Many factors can lead to an IRS audit. Some of the most common reasons for the IRS audit are:

• Data Entries, math errors, and overlooked income
• Failure to report all income, unreported income
• Overstating deductions on the tax return
• Wrongful filing status
• Claiming Earned Income Credit
• Self-Employment Income such as home based business, cash business, claiming hobby as business income, investment income, etc.
• Discrepancy between Individual and Corporate Filing
• Overstated Itemized deductions
• Overstated charitable deductions

During the audit, the IRS will notify the taxpayer first by mail if the taxpayer has been randomly selected for an audit. The letter will have the contact information and detailed instructions on how to respond to the audit. In the initial letter, the IRS will request specific documents in order to proceed with the audit. The IRS audit can also be conducted in person if the taxpayer doesn't respond to the document request by mail. The audit can take anywhere from six months to a year or more depending on the nature of the audit and the circumstances surrounding the audit.
The IRS audit can result in no change to your tax bill if all the substation was submitted. The audit can also result in proposed changes to your tax bill. If you agree to the proposed changes, you must sign the audit report and submit it to the auditor. If you disagree with the changes, you may request a conference with the IRS manager and file for appeals by submitting a formal appeals request.
The IRS audits can be challenging and stressful for an individual with no tax knowledge. It is recommend to seek the help of a tax professional who is aware of the IRS audit, its procedures, tax laws, and rules to maximize the end result of the audit.

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