You just received a notice that your tax return is being audited, what does it mean? A tax audit is an accounting process in which the IRS examines your individual or business financial statements to ensure that you filed your tax correctly. Accounting solutions White Plains NY helps you manage your finances accurately and eliminate the risk of IRS audits.
If you verify your initial return was accurate, you’ll not be asked anything further, however, if the IRS finds some error or purposeful misreporting, you will have to pay the recalculated amount and interest penalties. In case you have received an audit notice, the following are some steps you can take to tackle the situation.
Know Why Your Return is selected for Audit
While the IRS intends to tell your return is selected, it is up to you to ask. You return can be audited for many reasons, including:
- Certain activity on your return like cash wages, high deductions relative to your income, 1099 and W-2 forms do not match your reporting, reports inconsistent with previous years, etc
- Related examinations, where your statements involve transactions with someone else who is being audited
- Random selection
Identify How You are Being Audited
There are distinct tax audits, each with unique requirements, so knowing how you’re being audited will help you identify what document you’ll need, where to send them, and whether you need a tax attorney.
- Correspondence Audit: In this, the IRS service center demands more information regarding a part of your tax return. The IRS is typically seeking checks, receipts, and similar records.
- Office Audit: In this, the IRS service center urges you to bring certain financial documents to the local IRS office, as the audit will be conducted there.
- Field Audit: In this, an IRS agent will come to the place of your business to conduct the audit in person.
- Taxpayer Compliance Measurement Program Audit: This is the most thorough type of audit where every section of your return must be validated by documents.
Gather Your Documents
Once you identify what is expected of you, you can start to go through your financial records to find the relevant information. Never submit your original documents or your only copy, and never submit more than what is requested.
Once you gather all the copies and originals, get them organized, especially when you’re facing an office audit. Well organized documents demonstrate the agent that you are a responsible taxpayer, and it may result in limiting his scope of the investigation.
As soon as you receive the notice of an IRS audit, contact the tax professionals who prepared your return. They can explain the audit process and help you make the necessary preparations. However, if you employ professional services of accounting solutions White Plains NY, you might not get audited in the first place as they ensure all your records are compliant with IRS norms, and they accurately file timely returns for you.