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The IRS conducts audits to verify income and expenses claimed on tax returns. For 2020, the IRS audited 509,917 tax returns, which resulted in recommended additional tax of more than $12.9 billion. While your chances of getting audited are low, it is still possible to get selected by the IRS.
Sometimes you may be audited simply for having a complicated tax return or because the IRS thinks you may have more income than you claimed on your return. You’re also at greater risk of being audited if you are a high-income earner. Before you are audited, it’s important to know what an audit entails and what could happen during the audit. Here are some things to keep in mind if the IRS selects you for an audit!
There are a few different types of audits — a mail audit, office or desk audit or a field audit. Most IRS audits are conducted by mail, and only a quarter of the audits are conducted in person by the IRS.
A mail-in audit is basically just a paperwork request because the IRS is either missing paperwork or needs paperwork for an item on your tax return. Typically, mail tax audits involve simple issues, such as:
A mail tax audit is very deadline-oriented, and it is important that you mail in the items requested. The IRS could ask for any of the following:
Mail audits are simple and less intrusive, and many times, the audit ends in a change to the tax return.
In-office tax audits are a little bit more serious than mail-in audits and tend to be more in-depth than others. If you face an office audit, the IRS is most likely looking for improper deductions or underreported income.
During this type of tax audit, you’ll have a meeting with an IRS auditor referred to as a Tax Compliance Officer. This auditor will discuss your tax return with you and inspect your records. Office audits are conducted to ensure you are reporting your income accurately and paying the correct amount of tax. To support your federal tax return, you may need to provide some paperwork.
In a field audit, you will meet with an IRS agent known as a Revenue Officer. This meeting could occur at your place of business, home or your tax preparer’s office. Field tax audits revolve around more complicated issues and include a thorough investigation of your belongings and your home or business. This type of audit comprehensively reviews your entire financial record.
During a field audit, the IRS agent will generally request your accounting records and bank statements. If you don’t provide these documents to the agent, they will likely obtain them from your accountant or bank. The agent will examine your lifestyle and compare it against your reported income. If the IRS believes your lifestyle exceeds your income, they may assume you have unreported income.
You will know the time and date of your field audit, as it will be listed in the letter from the IRS. These tax audits vary in length, depending on:
Speak with a tax attorney at Polston Tax and have us handle the audit process to ensure every step goes smoothly.
There are three possible conclusions to an IRS tax audit — agreed, disagreed or no change.
If you agree with the proposed changes, you will sign an examination report or a similar form. If you disagree with the findings from the audit, you can go through mediation or file an appeal if the statute of limitations has not expired. The best way to appeal an IRS decision on an audit is by having a tax attorney from Polston Tax on your side.
If you are chosen for an IRS audit, there are some things you need to do and some things you should avoid while you are being audited.
If you want more guidance about what to do in a tax audit, turn to Polston Tax for our IRS audit representation services.
Trying to navigate an audit can be difficult, especially if you have a lot going on personally or in your business. That’s why we are here to help you. We know it can get tricky and stressful, and that’s why the tax attorneys at Polston Tax are ready to represent you against the IRS and help you file an appeal if necessary.
Since 2001, we have offered tax audit representation services to people like you. Our team includes tax attorneys and accomplished tax professionals with extensive experience representing both individuals and businesses during the auditing process. We know the language, and we know the tax law and how it can be applied. Contact us at Polston Tax to schedule your free consultation.
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