Tax Audit - Help and Information
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Like most taxpayers, you probably fear an IRS audit. Here you can find some tips on avoiding an IRS audit from the onset, or, if you're unfortunately already neck-deep in an IRS audit, how to survive it with a minimum loss. According to the IRS, most tax payers are picked based upon a computer analysis to determine which tax returns are most likely to be erroneous.If you happen to be audited by the IRS this year, you're not alone. In 1997, approximately 1.6 million individuals were audited by the IRS. This is around 1.5% of all taxpayers. As you can see, % wise, the IRS audits minimal tax returns. Tax returns singled out by the IRS have either tax deductions that appear to be too high in relationship to the person's income, tax items that require proof or an explanation, or tax items that are erroneous, or they are on the IRS' checklist of 'hot tax issues'. Therefore, the best way to avoid an IRS Audit is with good Tax Preparation and proper filing. In order to encourage voluntary compliance with the income tax laws, the IRS audits must effectively audit tax returns, as well as put a general fear in all taxpayers of being audited. Our tax system depends on voluntary compliance. With today's technology, there are more ways than ever that the IRS can monitor your tax compliance.
The likelihood of being audited by the IRS is much greater in the following circumstances:
You have large amounts of itemized deductions.
You have complex investment or business expenses.
You claim tax shelter investment losses.
You own or work in a business which receives cash in the ordinary course of business.
You have rental expenses.
Your business expenses are large in relation to your income on your tax return.
An informant has leaked information to the IRS.
A prior tax audit resulted in a tax deficiency.
You are a shareholder or partner in an audited partnership or corporation.
You have complex tax transactions without explanations.
You claim large cash contributions to charities (in relation to your income).
What if you receive an audit from the IRS?
If you receive an audit notice from the IRS, you mut know the rules and even more important, let the IRS know you're not an uninformed taxpayer. The more rights that you assert, the better off you'll be. You must first 'draw the line' so to speak, with the IRS. You must establish the ground rules of an audit, and know your rights during an audit. Here are some initial rights you have as a taxpayer.
1. You've got the right to conduct the entire audit at a time and place that is comfortable and convenient to you. You must use this right to prepare you 'defense' and avoid being caught off guard.
2. You can limit the scope of the audit, avoiding time and worry when discussing issues that aren't necessarily relevant to your personal tax (including your Income Tax)liability.
3. You can also record an audit so long as you give the IRS that right too. By using this right, you can ensure the IRS won't change the rules when they're halfway through the process.
