In reality, the IRS audits quite a few returns considering the millions of tax returns they process annually. The average number of returns audited annually totals just under 1%.
The IRS doesn’t routinely audit a tax return unless there is some key indicator. For instance, this could include a higher level of deductions compared to revenue earned, a deduction that requires documentation, or a specific item that’s on the list of “red flags.”
Explanations for an IRS Taxes Audit
The IRS has a standard list of reasons for requesting an audit. Just only because your return falls into one of these categories does not automatically mean you will be audited, but it certainly increases your chances. You may be audited by the IRS in the event you fall into any of the following categories, although this isn’t a full list:
* You are self-employed
* You submit a mileage log showing small business use of this vehicle
* You attempt to deduct home office expenses
* You earn an inordinately high salary
* You submit a big list of itemized deductions.
There’s truly no way of honestly preparing your taxes without having including all relevant facts about your enterprise and earnings. However, if you should frequently include any of the above items when preparing your return, you need not to be surprised if you are at some point audited.
The IRS Audit Process
Don’t let the idea of an IRS taxes audit scare you to death. An IRS taxes representative is not going to show up on your doorstep a single morning demanding to see all of these financial documents. Approximately 1/3 of all audits are conducted by mail and in most cases, the IRS will not be auditing your total taxes, but rather but a portion of your return. For instance, if you often deduct company meals the IRS may request receipts for these expenses.
The letter you obtain from the IRS will outline precisely what portion of your respective tax return is under dispute. IRS taxes attorneys will use the facts in that letter to assist you to prepare your IRS audit defense.
Your Rights In the Course of an IRS Audit
You have some rights during an IRS audits and these include items like the following, but not limited to just those listed here:
* The right to have an IRS tax attorney or accountant with you at your audit. Your attorney or accountant should have special permission to practice in front of the IRS
* The right to make a tape recording of your respective audit meeting, as long as you give the IRS at least ten days’ notice of your plan to do so
* The right to have your penalties waived if you’re able to prove that any mistake on your tax return was because of poor advice was given by an IRS employee
* The opportunity to give your IRS taxes lawyer power of attorney to ensure you will not need to be present at the IRS meeting throughout the entire process. This buys your attorney time, due to the fact he’ll need to request an extension before the meeting, to ensure he has sufficient time to gather details from you in person beforehand.
The most efficient way to avoid an IRS tax audit is to prepare an honest and accurate tax return every year. If you do make a mistake and end up being audited, the best defense for an IRS audit is going to be a qualified tax professional that can represent you in front of the IRS.
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