For many people, filing their tax returns is one of the most dreaded tasks that they have to perform every year. Not only does it entail giving up a big chunk of their money, but even the slightest mistake can also subject them to legal inspection and potentially having to pay hefty penalties. Since filing your taxes is inevitable, it’s your responsibility as an abiding citizen to seek knowledge about the tax audit process conducted by the Internal Revenue Services (IRS) to understand more about your rights and responsibilities.
Every year the IRS audits a huge number of tax returns, and one day your turn might come, so it’s best to be prepared. Here, you will find a brief guide to walk you through the process and eliminate the ambiguity factor once and for all. So, if/when your turn comes, the guide below should help you manage your expectations.
The Selection Phase
Tax audits are rarely random. Taxpayers who get chosen for the audit, however, are the ones deemed by the IRS to have a higher probability of having committed fraud or attempted tax evasion. Things like sudden fluctuations in your income, unreported income, or big itemized deductions are all considered red flags for the IRS to call upon a tax audit. However, in practice, the process is much more complicated than a few discrepancies here and there. The IRS relies on sophisticated automated formulas and third-party information to analyze the case of every taxpayer. According to the situation of your tax return, you’ll either be subjected to the common Campus examination or if the case was more pressing, you could be up for a Field examination. This is where the IRS requests to pay you a visit at your place of work for a more diligent investigation.
The Audit Examination Phase
Upon your tax return’s selection for audit, the IRS will send you a notification by mail to let you know of the audit process underway. Although it’s reason enough to panic, failure to act is the worst thing you could possibly do at this stage. Especially because you have only thirty days to respond with the requested documents, or you’ll run the risk of more dire consequences. Your best course of action, once you’re notified, is to contact an IRS audit defense team to step in and do the needful. This is the only way you can guarantee to get the upper hand and be able to stand up to the IRS authority. If you don’t have your own legal team, now is the time to do your research and find experienced professionals that you can trust and rely on.
The Final Phase
After the IRS authority is done with their examination, they issue a report with the findings. In a form called Letter 915 or 525, you will receive all the details about any adjustments made. You can either accept the adjustments and agree to pay the amount in full, or, you can request a payment plan through your attorneys to give yourself enough room to get your finances sorted.
There’s no denying that the IRS tax audit process can leave you feeling overwhelmed or even slightly scared. However, this guide is intended to give you enough information to ease your nerves and plan your defense tactics. The key here is to have a proper legal representation to act on your behalf and do whatever is necessary to mitigate your losses and fend off any possible legal charges.