An IRS audit. Just hearing those words can send fear through even the most honest of taxpayers. But it happens to many people, even if they've done their best to get their taxes right.
If you're facing an audit, the best approach is to understand the process, why your return was audited, what your rights and responsibilities are, and how you can appeal the findings. Here are six things to know.
When your return is audited, you're not being accused of a crime. The IRS audit is simply conducting an impartial review of your tax return to determine its accuracy. You will be expected to demonstrate that you've reported all your income and were eligible to take all the credits, deductions and exemptions shown on your return.
The IRS must generally complete an audit within three years of when the tax return was filed unless tax fraud or a substantial underreporting of income is involved.
Your return may be more likely to be audited if you are self-employed, receive much of your income in tips or run a cash-intensive business. People who run their own businesses and do their own bookkeeping are also more likely to be audited.
Taking more than the average amount of itemized deductions in some areas can also do it. They include medical and dental expenses, taxes, charitable contributions, and miscellaneous expenses.
Some other issues that may attract IRS attention include a return that:
Not all audits are the same. The types include:
In an audit, you have a right to:
5. Keep these tips in mind
If you agree with the auditor's findings, you'll complete some paperwork and pay what's owed. If you disagree, disputed items can be reviewed informally with the auditor's supervisor or through mediation known as Alternative Dispute Resolution (ADR).
If that doesn't resolve the problem, you can file an appeal with the IRS Appeals Office, which is independent of the local office that conducted the audit.
If you can't reach an agreement with the appeals officer, you may be able to take your case to the U.S. Tax Court, U.S. Court of Federal Claims, or U.S. District Court in your area.
The Nevada Society of CPAs is part of 360 Degrees of Financial Literacy, a national effort of the AICPA and the state CPA societies to improve the financial understanding of Americans. For more information about the profession's efforts, visit www.nevadacpa.org or www.360financialliteracy.org.
-->An IRS audit. Just hearing those words can send fear through even the most honest of taxpayers. But it happens to many people, even if they've done their best to get their taxes right.
If you're facing an audit, the best approach is to understand the process, why your return was audited, what your rights and responsibilities are, and how you can appeal the findings. Here are six things to know.
When your return is audited, you're not being accused of a crime. The IRS audit is simply conducting an impartial review of your tax return to determine its accuracy. You will be expected to demonstrate that you've reported all your income and were eligible to take all the credits, deductions and exemptions shown on your return.
The IRS must generally complete an audit within three years of when the tax return was filed unless tax fraud or a substantial underreporting of income is involved.
Your return may be more likely to be audited if you are self-employed, receive much of your income in tips or run a cash-intensive business. People who run their own businesses and do their own bookkeeping are also more likely to be audited.
Taking more than the average amount of itemized deductions in some areas can also do it. They include medical and dental expenses, taxes, charitable contributions, and miscellaneous expenses.
Some other issues that may attract IRS attention include a return that:
Not all audits are the same. The types include:
In an audit, you have a right to:
5. Keep these tips in mind
If you agree with the auditor's findings, you'll complete some paperwork and pay what's owed. If you disagree, disputed items can be reviewed informally with the auditor's supervisor or through mediation known as Alternative Dispute Resolution (ADR).
If that doesn't resolve the problem, you can file an appeal with the IRS Appeals Office, which is independent of the local office that conducted the audit.
If you can't reach an agreement with the appeals officer, you may be able to take your case to the U.S. Tax Court, U.S. Court of Federal Claims, or U.S. District Court in your area.
The Nevada Society of CPAs is part of 360 Degrees of Financial Literacy, a national effort of the AICPA and the state CPA societies to improve the financial understanding of Americans. For more information about the profession's efforts, visit www.nevadacpa.org or www.360financialliteracy.org.