What Is an IRS Audit and What Does It Mean for You?
According to the Internal Revenue Service (IRS), an audit is “a review/examination of an organization’s or individual’s accounts and financial information to ensure information is being reported correctly, according to the tax laws, to verify the amount of tax reported is substantially correct.” In short, it is a thorough assessment of the amount of income and expenses a person and/or a business has conducted for the year in question. To put it another way, it’s tax season on steroids!
How Do I Know If I’ve Been Audited?
When the IRS selects a person whom they want to audit, they will contact that person by phone or email. The IRS will not send notification through email. So if you were to ever receive an email notice from someone claiming to represent the IRS, report that person immediately! It is most likely a scammer trying to extract personal information for his or her own illegal benefit at your expense.
Does an Audit Mean I’m in Trouble?
Not necessarily. The IRS claims to conduct random selections when it comes to determining which taxpayer to audit. According to the IRS, a taxpayer is chosen for an audit in three ways:
- Computer screening– It’s kind of like the lottery! A sophisticated statistical formula searches the IRS database producing a random output of names of taxpayers who will be audited. So if you’ve never won the lottery, you might be in good shape, but then again, maybe not…
- Inconsistent tax filings – If for some reason, what has been recorded on any annual tax filing doesn’t match the supporting documents, that serves as a red flag to the IRS indicating that perhaps some foul play…or maybe just a simple typo! Either way, they need to verify.
- Related documentation – Oftentimes in business dealings one can be audited just for being associated with another company that is in question. The IRS may consider anyone who has had any business transactions with that party a suspect by association.
What’s the Next Step?
The first thing one should do if he or she were to receive an audit letter is gather all of the documents for that year in question. At the very least, there should be an annual tax filing. If you don’t have that, then it might be time to find a tax relief service to guide you toward the next critical steps toward resolving your tax issues.
What Does This Mean for Me?
Each audit case is different. It really depends on how complicated one case is. This has everything to do with how many parties are involved,and how well the communication process goes. In any case, an audit will end in 3 ways:
- No change – It’s like the IRS is saying, “Sorry for the inconvenience, you’re good to go!”
- Agreed– The IRS found some discrepancies, changed them and you as the taxpayer agrees and complies with the changes made.
- Disagreed– This is where things can get complicated. The IRS makes changes that you do not agree with. As a US taxpayer, it is your right to contest these changes.
Get Relief. Tax Relief!
When tax issues get complicated, that’s when it’s time to get help. Success Tax Relief specializes in communicating with the IRS on your behalf. We have over 30 years of experience consulting with tax professionals and are confident that we can resolve any tax issues you may have. If you have any questions about audit letters or other tax issues ask us a question online or call us at 1-877-825-1179 today!