Most people have most likely heard of a tax audit. It even has some negative connotations linked to it. That’s why most Americans fear to be audited by the IRS, even the people who try to comply with the law strictly. In most cases, these stories are worst-possible case scenarios by people online or people who hear from their friends. Nonetheless, tax audits from the IRS must always be taken as seriously as possible, or else it can lead to you paying a certain amount of money that you owe, may it be from interest, past-due taxes, and other tax-related matters.
What is a tax audit?
A tax audit is a formal process where the Internal Revenue Service or the IRS examines an individual’s tax return a little more closely than usual. This process is to ensure that all the data that an individual reported is as accurate as possible.
There are different types of audits:
- Correspondence Audits – The IRS requests an individual for additional information to verify their tax returns’ accuracy and details.
- Office Audits – This refers to an in-person interview together with an IRS manager to process an individual’s audit.
- Field Audits – This could be a visitation to an individual’s home or business. The IRS could potentially ask to see things that are related to the tax that a person reported.
- Random Audits – This type of audit can be done without any specific reason. The auditor from the IRS will review the tax return in question in order to validate all the provided information by an individual.
What can trigger an audit?
There are various reasons for an audit to be “triggered.” These are often activities or processes that the IRS deem suspicious or out of the ordinary for a certain individual. The IRS utilizes a computer scoring system named Discriminant Information Function or DIF, which rates the possibility for change based on the individual’s IRS history with similar returns. This system analyzes tax deductions and compares their data to their previous records, and is used as the basis if ever an audit occurs.
- Potential issues might arise when an individual’s full income wasn’t reported or if certain business operation’s losses are deemed unusual by the IRS.
- Inconsistencies in returns, unnecessary/unusual business expense deductions, sudden plummeting of reported income, and report omissions could also be potential triggers for an IRS audit.
- Remarkably large sums of charitable deductions could possibly trigger an audit but are usually allowed by the IRS if the individual has the appropriate documents and receipts necessary to prove the deductions.
- Making an exceptional amount of money could also cause suspicions to the IRS, which could, in turn, trigger an audit of an individual.
- Having a questionable amount (or any amount) of money in a foreign bank account. If unwarranted, this could cause issues and trigger an immediate audit of an individual.
The IRS could also send out an audit notification through the mail to individuals for some minor reasons such as; a certain amount of balance is due, they are due either a larger or smaller refund, identity verification, questions about the tax return, seeking additional information, a tax return has been changed, and a need to notify for some delay in the processing of the return.
What could happen after an audit?
There are multiple possible outcomes after an audit has been conducted. If the IRS confirmed that all the information and explanation that were provided to them were accurate and credible, the IRS would not change anything on the individual’s tax return. If a certain change was proposed by the IRS to the individual’s tax return, they can either accept or challenge the assessment. If the individual accepted, they will then sign an examination report and other required documents in order to settle down in some sort of payment plan with the IRS. Suppose the individual decided to challenge the assessment. In that case, they can then set up a conference with a manager from the IRS to further investigate the matter at hand or review the case, or the individual can request for a formal appeals conference.
Be prepared for an incoming audit.
In most cases, audits are relatively simple concerns regarding a person’s tax return. Still, there are times that things could be a little bit complicated and could involve a more extensive investigation and documentation of the matter. That’s why the best possible course of action is even before the audit is conducted; it is best to reach out to a Tax Audit lawyer for a consultation. This measure makes things easier for the individual and protects their rights as a citizen of the country.
Tax Audit Lawyers and what they do
Tax audit lawyers are legal experts in the particular field of taxes of law. They provide different kinds of services for an individual before, during, and after an audit of the IRS. Without the services of a Tax audit attorney, facing audits alone could be physically and mentally taxing for people. It could take a while to go into the process of auditing without legal advice, which then leads to frustration, or worse, a person might end up spending more than what they actually owed.
If the client is in an unfavorable position, they could be facing penalties, interests, or worse, even criminal charges. Having legal counsel through a tax audit attorney present during the process is can significantly benefit the individual’s case. The tax audit attorney will ensure that all the information will be provided and presented in the best way possible for the case to be in their client’s favor, as well as to make sure that their client is justly treated in accordance with the law. With a tax audit lawyer representing their clients’ case, negotiation and reduction of penalties would be a much easier process than if they were to face the whole process alone.
Apart from the concerns mentioned, the priority of tax audit lawyers is to secure your information. Tax audit lawyers have extensive knowledge about the process not only in preparation for the audit but they will also help their clients negotiate and even defend them if necessary. It is the duty of a tax audit lawyer to provide the maximum protection possible not only of their client’s information but their clients themselves.
Tax Attorneys and Tax Relief Firm in California
Coast One Tax Group
Based in California, USA, Coast One Tax Group is a tax relief firm that provides its legal services nationwide. Their team is composed of Tax Lawyers, Certified Public Accountants, and Enrolled Agents to help provide the best quality legal service to any tax-related case that one might have. The firm is rated “A+” by the Better Business Bureau and has five-star ratings on both Google and TrustLink. Coast One Tax Group has been operating since 2008. With the experience of their legal experts and the longevity of their firm, they guarantee to achieve the best possible result to get their clients out of the hardships that are brought along by tax issues and problems. If you ever need to settle any tax-related issues that you are facing, do not hesitate to reach out to the Coast One Tax Group through their website and set your consultation today.