Tax Preparation Phoenix Tax Planning LLC
Oh No! You just got an IRS audit order in the mail. Audit is a scary word even if you’ve done everything right. However, the chances of an Internal Revenue Service audit aren’t that high. In 2016, the IRS audited only 0.7% of all individual tax returns.
Being audited does not necessarily mean that the IRS thinks you’ve done anything wrong. An audit is just a formal review of a tax return. It is just to ensure that the information is being reported according to current tax law and to confirm that the information itself is accurate.
The IRS uses three main methods to select returns for audit. The first is random selection. Some returns are chosen at random based on the results of a statistical formula. It’s sort of like a reverse lottery. The IRS compares reports from payers, such as employer W2 forms, 1099 forms from banks and brokerages, and others, to the returns filed by taxpayers. When information doesn’t match, the taxpayer may be examined further.
Another method is related examinations. Some returns are chosen for an audit simply because they involve issues or transactions with other taxpayers whose returns have been selected for an audit.
There are a number of sound tax practices that may reduce the chances of an audit. For expert tax preparation Phoenix Tax Planning LLC is the premier firm.
To help the chances of avoiding an audit, there are some actions that a taxpayer can take. First, be sure to provide complete Information. One of the most common mistakes and omissions is commonly is missing Social Security numbers, including those for any dependent children and ex-spouses. Also, try to avoid math errors. If the IRS receives a return that has math errors, it will assess the error and sends a notice without following its normal deficiency procedures.
Be sure that the numbers on all forms match. The numbers on any W-2 and 1099 forms must match the returns to which they are tied. Failure to do so may cause an audit. The IRS records those returns it has audited. It may check to make sure past errors aren’t repeated, so do not repeat the same mistakes every year.
It is very important to keep complete records. This won’t necessarily diminish the chance of an audit, but it may make it much easier to comply with IRS requests for documentation, if one should occur.
Please understand that the information in this article is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
In general, the IRS audits returns within three years of their being filed. If substantial errors are identified, it can go back further. Even then, the IRS will usually not go back any further than six years.
To enhance the chances of avoiding an audit, rely on expert tax preparation Phoenix Tax Planning LLC