Most people's reaction to getting a letter from the Internal Revenue Service (IRS) letting them know that their return is being audited would be met by fear. After all, tax officials only reevaluate the submissions of less than 1 percent of all filers each year. While this may be the case, when the spotlight is on you, that's enough to instill some fear in you. You may be wondering what the next steps that the IRS is going to take in your case.
Those who are self-employed or who are high-income earners are the ones most frequently audited. These individuals are most apt to be audited if they have a hobby business or take inconsistent deductions from one year to the next.
Audits can take on many forms. The three types are field exam, office exam or a correspondence exam.
Field exam audits are generally seen as the most serious as they involve an agent showing up at your place of business and spending hours combing through your financial records.
Office exam audits are those which involve you having to gather together paperwork to bring to a local IRS office for an agent to review. These meetings often last as long as four hours and may involve them asking questions about certain transactions.
All but 20 percent of audits are correspondence ones. They're generally handled through the mail service.
No matter what type of audit that you're asked to participate in, it's important that you respond to the agent's questions as thoroughly and truthfully as possible. It's important that you stick to the issues at hand though.
Individuals who have difficulty making it through the audit process tend to be those who are intentionally deceptive, volunteer information that's beyond the scope of the investigation or who become aggressive with the agent working on their case.
While only those who pull off complex tax evasion schemes ultimately get put in jail, an auditor does have the authority to adjust your return, which may leave you owing significantly more than was originally due.
Tax compliance laws are constantly changing. Claiming that you didn't know that they'd changed is not an excuse for not doing what's required of you. Having a Lafayette tax law attorney both prepare your taxes and on hand to represent you in case you're audited will give you that peace of mind to be able to focus on growing your revenue now and in the future.