For business owners, hearing the word audit can be very bad, where it ranks 10, on a scale of 1 to 10. However, there’s no need to panic because if you’re prepared, then there’s nothing to fear. When the Internal Revenue Service selects your returns for an examination, it can be random, and it doesn’t automatically mean that something is wrong. See info about how audits work when you go to this page here.
These audits are performed by mail or in person, and you need to submit the required documents that they need. Afterward, they may propose some changes or accept your returns without doing anything. If there are adjustments, it can affect the amount that you would pay them.
How to Get Penalized?
Audits and fines are the two tools that the IRS is utilizing to motivate taxpayers to be honest in filing their returns. When you’re getting audited, treat this as something very serious because you can get additional penalties and be forced to pay additional taxes with a hefty interest.
Most people may find themselves getting accuracy-related fines, and the IRS may even recommend a prosecution when this happens. When the taxman finds out that your paperwork is not accurate or you underreport your income by at least $5,000, then this is going to spell trouble.
Also, they might also look into someone that may be undervaluing or overvaluing their properties, not paying taxes on the deadline, decreasing the value of an estate, or evasion by understating reportable transactions.
Understanding the Entire Process
Audits are Not Immediate Accusations of Wrongdoings
Know that you’re not being accused immediately of doing a crime. It’s one way for the taxmen to have an impartial review of the returns, and your returns happen to land on the table of the auditor. If you have demonstrated the accuracy of your statements and make sure that most of the deductions are eligible, then consider yourself safe.
Risky Returns
Some professionals are considered riskier, such as the ones that are self-employed because they may receive a lot of their income as tips. This is also true with accountants or lawyers who do their own bookkeeping may also be at risk. Itemized deductions that are hefty and do not match your W-2s or 1099s might also get audited.
Those who have alimony deductions, earned income tax credits, returns signed by preparers with known problems in the past, or missing required schedules, might attract the attention of the IRS if they’re not careful.
Various Types of Audits to Know About
Correspondence audits are processed through mail, and this is often related to a simple mistake. If the taxmen are satisfied with the additional information that you provided, then there’s no need to take further action. For an office audit, you need to bring all your records so they can examine high deductions in one area. You need to show related receipts for the transactions to prove that they’re legitimate.
Tips to Help You Out
Postponement can be requested if you have time to gather all of your paperwork. You might want to read the Taxpayer’s Bill of Rights before you show up for an audit, and you might want to meet with a tax attorney from Cumberland Law Group before you get interviewed by an IRS agent. Also, it’s best if you only bring the paperwork that’s required, and you arrive at the IRS thoroughly prepared. It’s best to be professional at all times and ask to speak with a supervisor if you feel that you’ve been unfairly treated.
How a Lawyer Can Help You Out?
While some audits are random, the IRS can also conduct targeted ones that can happen when the filings are questionable. You need to defend yourself if you see that you’re getting an unfavorable audit determination and you’re facing the risk of criminal prosecution.
A lawyer can help you execute a strategic defense towards the issues that you’re facing. For example, if you fail to complete the necessary forms, you might be subjected to other obligations as well.
A defense strategy that you can use during the interview is to demonstrate that this filing was not required when you’re seeking an innocent spouse relief. This is often going to relieve an individual from paying additional fees if their significant other did something wrong when filing returns.
What Happens When There’s Miscalculations?
Accountants can miscalculate the total amount that you need to pay for the IRS, and this can happen all the time. However, you’re still expected to pay for the amount that you owe plus the interest, even if it’s someone else’s fault.
There are also instances of cryptocurrency-related incidences that are becoming a top priority in the enforcement efforts of the IRS. Those who can’t track what they’ve bought or sold accurately may need a lawyer to help them get out of these problems.
For those who fail to report foreign income, it can trigger a substantial liability. This is also true for businesses that are always subjected to a lot of payment obligations and are expected to remit their employee taxes. Read post about how to do your taxes in this link: https://www.accounting.com/resources/how-to-do-taxes/. Engaging a tax lawyer who will represent you and examine your records will mean that you can create a solid strategy that you can pursue.
The outcomes that you’re looking for can include no additional liabilities because the senior attorneys will work with the taxmen to terminate your company audit. They might also want to achieve a settlement agreement or challenge the outcome of your audit through an appeal.
