As an American citizen, you’re always in fear of making a mathematical error when you’re filing your taxes unless you’ve got a professional doing it for you. This feeling of fear can become a lot stronger when the Internal Revenue Service (IRS) sends you a piece of mail stating that you’re going to be audited. Luckily, knowing how an audit works and the steps you need to take during the audit can help you relieve some of that fear very quickly.
The Different Types of Audits
While there are quite a few types of audits that the IRS conducts, the most common three that you should expect are the correspondence audit, office audit, and line-by-line audit.
- Correspondence Audit: This audit usually occurs when you’ve made a slight error that has raised some eyebrows. You usually submit your revised paperwork via physical mail or email, so the process is quite easy.
- Office Audit: This audit can be a little intense, as you’re required to visit an IRS office in person. You will be interviewed about your taxes, so it’s better to take your accountant or your lawyer with you in case you want to dispute any penalties filed against you.
- Line-by-Line Audit: This audit is mostly conducted at random, so receiving one isn’t that big of a deal. The IRS goes through your tax returns line-by-line (hence, the name) to determine the future norms you should follow when you’re filing your taxes.
Why You Might Get Audited
Some of the main reasons that can get you audited are making mathematical errors, not reporting some income, being too charitable without the necessary proof, and claiming a home office deduction. Researching the other reasons that might get you audited is recommended, but the main reason behind it is when something doesn’t quite add up. The IRS is pretty good at detecting false reports, so trying to outsmart them isn’t recommended.
How To Get Help With Your Audit
Handling your audit all alone isn’t recommended, especially if you’re not experienced with tax laws. Certified public accountants (CPAs) at Hakim & Co. recommend that if you are called in for an office audit that you have a professional accompany you. Business owners benefit a lot more from having a CPA by their side, as it can be quite a hassle to keep track of all the business’s expenses without any help.
Preventing Future Audits
If you’re filing your taxes, then you need to quadruple-check your expenses down to the dot. Any miscalculations on your end can lead to a very annoying audit, followed by an unnecessary fine. Including certain things that you don’t have the necessary paperwork for in your tax return isn’t smart either, since proving it will be impossible and failing to provide that proof can lead to more trouble.
Learning more about what you should do when you get audited by the IRS can potentially help you prevent it from happening. If you get audited randomly, you’ll be able to stay a lot calmer if you’re aware of why you got audited and what you’re required to do. Having an expert by your side is always helpful, as they’re bound to know how to handle anything that comes your way.
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