Taxpayers could be subject to an audit if the IRS believes there are any errors or discrepancies on any tax returns filed by the individual. During the circumstances, the IRS starts the audit and sends a request for specific documents that show the receipts for the deductions and how they pertain to a business or the taxpayer. Any suspicious activities are flagged by the IRS, and the individual must provide evidence to substantiate their deductions as legal. Reviewing important details about the tax audit shows the individual what to expect.
How are Taxpayers Notified?
The IRS sends a written notice to the taxpayer explaining that they are getting audited. The written notice explains what the audit is related to and what the federal or state agency is investigating. Typically, the audit is in reference to discrepancies on the tax forms or potential miscalculations. The IRS will explain whether the taxpayer must send in documents that show their receipts for deductions, or if they must meet in person to answer questions about their deductions. The Internal Revenue Service will explain what the taxpayer must do to substantiate their tax deductions and avoid fraud or evasion charges. Any taxpayer that is notified of an audit and needs legal representation can contact Brotman Law for assistance now.
What You Need for the Audit
For the tax audit, the taxpayer follows the exact instructions on their letter. If it is a mail in audit, they must need to find the paperwork required for the deductions and send them to the IRS. The agency will ask questions about additional deposits in the taxpayer’s bank account that do not coincide with their pay periods or equate to the earnings they listed on their tax forms. They need to know if the taxpayer’s family gives them money that could increase their earnings or require the individual to pay more in taxes. They’ll ask questions about any activities related to the individual’s job and if any of these events led to additional income.
Meeting Deadlines Promptly
The IRS provides the taxpayer with a deadline to turn over the requested forms and determine if these deductions are legitimate or if the taxpayer fabricated their expenses. If the taxpayer misses the deadline, the IRS can take action against them, including applying penalties and possibly jail time or fines. It is necessary for all taxpayers who are informed of an audit to comply with all instructions provided by the IRS.
Can the Taxpayer Appeal?
An appeal is possible for anyone who has undergone an audit and doesn’t agree with the results. This requires the taxpayer to hire an attorney and file their appeal promptly through the state or federal court. The individual has a period of no more than 30 days to complete the appeal and prepare for court. If they do not respond to their Statutory Notice of Deficiency, the taxpayer could lose their right to start an appeal, and they must comply with the orders of the IRS as directed after the audit.
What Would You Need to Bring to An Appointment?
Taxpayers must bring their audit letter and all documents requested by the IRS to their audit meeting. They may need their tax forms for the year in question. If they operate a business, they need all the tax returns for the company for two years prior to the audit. All documents that are sent to their account or tax prep service, and all notices from the IRS about the return that they are auditing. The IRS will need receipts for any purchases that were deducted on the tax returns.
How Long Does the IRS Have to Complete the Audit?
According to tax laws, the IRS has a period of no more than three years to complete an audit. However, if the taxpayer has failed to report larger sums of money to the IRS for several years, the IRS can take as long as six years to complete their audit. If the audit required the taxpayer to send in mail-in documents, it won’t take more than six months. In person audits will take no more than one year, and the time required for a field audit doesn’t exceed one year. However, the individual and their income level could affect how long it takes them to complete their assessment.
Can They Audit More Than One Year?
Yes, the IRS can audit as many years as they choose. If the agency suspects the individual of any wrongdoing, they can open tax files up to ten years. The taxpayer must comply and provide any tax returns the IRS asked for within the ten-year period, or the agency will dig through the returns on file for the individual. However, if there were not any receipts added to the file for the deductions, the IRS will need complete records from the taxpayer. If they didn’t keep the receipts, this could lead to adjustments by the IRS, and the individual will pay more in taxes.
Why It’s a Great Idea to Have an Attorney
Tax attorneys understand tax codes and laws, and they can handle the IRS and provide better answers to the agency’s questions. The taxpayer may not understand some of the questions and will need to refer to an attorney for guidance. If they are involved in a field audit, the attorney could review all the documents the IRS has and explain the taxpayer’s rights. The attorneys know how to handle the IRS more efficiently than the taxpayer and could help the individual avoid penalties.
Taxpayers must complete tax returns each year according to tax laws for the federal and state government. If the IRS suspects the taxpayer has added to many deductions for their business-related expenses or losses, the agency can initiate an audit. During the audit, the individual must provide evidence of all receipts for their deductions. The IRS notifies the individual through the mail and explains what documents they need. Reviewing all tax laws with an attorney helps taxpayers avoid negative outcomes and higher tax implications.