There are many beliefs to what the Internal Revenue Service (IRS) does and doesn’t do. However, one fact about the IRS is that they have the right to send you a legal audit notice if they feel you have committed tax fraud. If case the information provided in your tax returns is not acceptable, they may choose to take a closer look and inspect your financial records. An IRS audit is usually conducted if there is a suspicion of fraud, but there could be errors in paperwork as well. Sometimes tax audits are conducted randomly, and it is important to be prepared in case you do receive an audit notice.
If possible, it is important to avoid IRS audits as they can waste a lot of time and energy for both you and the government. There are not many ways to avoid being part of a randomly selected group that gets audited. However, there are other ways to make sure you do not get selected for an IRS audit. Make sure you do not make common mistakes like math errors and omitted incomes in your tax returns. These small mistakes could lead to an in depth look into your finances. The IRS might find something that even you did not realize is an error. Make sure there are no discrepancies between your lifestyle and your reported income. For example, if you report a relatively low income, but live in an expensive neighborhood, an IRS officer might get suspicious.
In case you do receive an audit notice, despite taking preventive measures, it is important to understand the tax laws. Review the tax payer’s bill and try to prepare for any questions or inquiries that you feel the IRS might make into your finances. It is important to have everything prepared beforehand so you are confident when answering tough questions. This can be accomplished by keeping your files accurate during tax season.
If you have already received an audit notice, it is advisable to hire an experienced attorney as soon as possible. The attorney will go through your financial statements and help you prepare for the IRS audit.