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Many people feel stressed out during tax season. Even if you file your taxes on time and correctly, the thought of being audited by the IRS can be stressful.
What does a tax audit really mean? How likely is it that someone will pick you for one? It will talk about the most common types of tax audits, how to get ready for them, and how to stay calm if you do get inspected.
If you want professional help and advice getting through tax season, you might want to look into tax services in Columbus.
What is a tax audit?
When the Internal Revenue Service looks over your tax return, this is called an IRS audit. There are several reasons why the IRS might decide to check your tax return. Like, there could be discrepancies between what you told the IRS about your income and what you put on your tax return.
An audit can also happen if your tax return has math mistakes or missing information. Another reason could be trying to get benefits or credits that the IRS thinks you can not have.
Types of tax audits.
There are three main types of tax checks to look at:
- Correspondence audit: This is the most common type of audit. You get mail from the IRS with questions about your tax return. Most of the time, you can reply by mail or by meeting with an IRS investigator in person.
- Office audit: You are called into an IRS office to meet with an inspector for this type. There will be proof needed to back up the things on your tax return.
- Field audit: This type does not happen very often. An IRS inspector will check out your records at your home or place of work. Field audits are usually only done on complicated tax forms or when fraud is suspected.
How to prepare for a tax audit.
Keeping careful records is the best way to get ready for a tax check. This means keeping all important tax papers, like bills, records, and canceled checks. Also, you should keep copies of your tax forms for at least three years.
If you are audited by the IRS, stay cool and give them all the information they need. Be honest and true in your answers, and quickly give the inspector any proof they ask for.
You might want to hire a tax expert to help you during the audit. Tax experts with the right credentials can give you good advice and protect your rights.
Common tax audit triggers.
The IRS picks audits at random, but there are some things that can make it more likely that you will be inspected.
- High income: People who make a lot of money are more likely to be audited than people who make less money.
- Self-employment: People who work for themselves are often audited more often than people who get paid a salary. This is because people who are self-employed can claim more tax credits and discounts, which can make it harder for the IRS to check.
- Large deductions or credits: Claiming large discounts or credits can make you more likely to be audited. This is especially true if you are trying to get points or discounts that are not used very often.
- Inconsistent reporting: There may be a big difference between the income you told the IRS and the income you put on your tax return. If there is this difference, you may be flagged for an audit.
How to deal with an audit notice.
Do not worry if the IRS sends you a warning about an audit. Carefully read the letter and make sure you know what the IRS wants. You can talk to the IRS about the audit. They might be ready to help you solve the problem.
Tax audits can be frightening, but you can feel more confident if you know how they work, keep good records, file your taxes properly, and get help from a professional.