Every year, before you know it, tax season approaches, and it’s time to send your tax returns in. Like in prior years, you either complete the annual tax documents on your own, or you hire a tax professional. Either way, you get everything submitted on time just like every other year, right? Well, shortly after, know that there is always that chance that you may be audited. Have you found yourself with the audit notice asking about your prior transactional activities? If so, are some things you need to know.
If you have received your mail notice from the IRS, the first part is understanding what this means for you. Ultimately, an audit is the review of your prior tax returns and the determination of whether you were accurate in filing or not. Typically, it is done within two years from the original filing date; however, it could be as far out as six years, for example. When it exceeds two years, this is, primarily, in circumstances where there is a notable identified error that calls for further review of your finances.
According to the IRS, there are several reasons why you could be picked for a tax audit. One of these is based on the statistical norms of what a tax return should look like. If your return fits outside of these “parameters,” the chances are higher that it’s chosen for an audit.
Another reason for selection is that your returns correlate to someone else who has been audited. This could be a business partner or investor, for example. Any activity that involves them or that may be flagged as a mistake on your report could lead you to an audit.
The final cause for an audit is due to random selection. While this concept is controversial, it happens occasionally.
When it comes time to respond to the inquiries of the IRS, be prompt. Luckily, everything will be spelled out when they send their request. Even so, be ready to provide documentation to support your returns and prove your transactions or financial activities. Just know that once you send in the initial paperwork or response, they will follow-up with you.
When audited by the IRS, there are three possible outcomes based on prior years’ filings:
Whenever you find yourself in a tricky situation, such as a tax audit, obtaining tax court representation is a smart move to ensure your audit is done properly. Essentially, our tax resolution attorneys in Salt Lake County will fight for you and work with the IRS along the way. With representation, you can rest assured that your case is being handled with your best interest in mind. Both attorneys at our firm are well-versed in tax law and have experience working with the IRS. Therefore, they can thoughtfully address the concerns on your behalf while working on getting you the best possible outcome. To get started, contact our firm today!