What is an audit?
An audit is when the IRS comes to inspect your financial records to make sure you are accurately reporting your income and paying the correct amount of taxes. If they find any discrepancies, they may charge you penalties or interest.
How can I avoid an audit?
There are some things you can do to avoid being audited:
- Make sure you accurately report your income. This means reporting all sources of income, whether they are from a job, investments, or other sources.
- Make sure you keep good records. This includes keeping track of receipts, bank statements, and other financial documents. This will help you be able to accurately report your income and expenses.
- Make sure your tax return is accurate. This means double-checking your math and making sure you have included all the required forms and schedules.
- If you are self-employed, make sure you pay your estimated taxes. This is because self-employed individuals are responsible for paying their own taxes throughout the year, rather than having them withheld from their paycheck.
- If you have a complex financial situation, consider hiring a professional to help you prepare your tax return. This can help ensure that your return is accurate and complete, and it can also help you take advantage of all the deductions and credits you are entitled to.
What if I am audited?
If you are audited, the IRS will notify you in writing. They will specify what records they need to see and set up a meeting with you to review them. It is important to cooperate with the IRS and provide them with the information they request. If you do not, you may be subject to penalties or interest.
If you disagree with the results of the audit, you have the right to appeal. You will need to submit a written request within 30 days of the date on the audit notice.
You may also want to consider hiring a professional to help you with the appeals process. Lawyers specializing in tax law can help you navigate the complex appeals process and give you the best chance of success.
Who is most likely to be audited?
There are a few factors that can make you more likely to be audited:
- Reporting a large amount of income. If your income is significantly higher than average, you may be more likely to be audited.
- Taking large deductions. Deducting a large amount of expenses can raise red flags and make you more likely to be audited.
- Having a history of being audited. If you have been audited in the past, you may be more likely to be audited again in the future.
- Not cooperating with the IRS. If you do not cooperate with the IRS or provide them with the information they request, you may be more likely to be audited.
While no one likes the thought of being audited, there are ways to avoid it. By accurately reporting your income and keeping good records, you can reduce your chances of being audited. If you are audited, cooperating with the IRS and following the appeals process can help you resolve the issue.