What If You Get Audited?

“Audit” is a word that can strike fear into the hearts of taxpayers. However, the chances of an IRS audit aren’t that high. 2017 shows the IRS audited 0.5% of all individual tax returns.[i]

Being audited does not necessarily imply that the IRS suspects wrongdoing. The IRS says that an audit is just a formal review of a tax return to ensure information is being reported according to current tax law and to verify that the information itself is accurate.

The IRS selects returns for audit using three main methods:

  • Random Selection. Some returns are chosen at random based on the results of a statistical formula.
  • Information Matching. The IRS compares reports from payers – W-2 forms from employers, 1099 forms from banks and brokerages, and others – to the returns filed by taxpayers. Those that don’t match may be examined further.
  • Related Examinations. Some returns are selected for an audit because they involve issues or transactions with other taxpayers whose returns have been selected for examination.

Several tax practices that may reduce the chances of an audit.

Provide Complete Information. Among the most overlooked information is missing Social Security numbers – including those for any dependent children and ex-spouses.

Avoid Math Errors. When the IRS receives a return that contains math errors, it assesses the error and sends a notice without following its normal deficiency procedures.

Match Your Statements. The numbers on any W-2 and 1099 forms must match the returns to which they are tied. Those that don’t match may be flagged for an audit.

Don’t Repeat Mistakes. The IRS remembers those returns it has audited. It may check to make sure past errors aren’t repeated.

Keep Complete Records. This won’t reduce the chance of an audit, but it potentially may make it much easier to comply with IRS requests for documentation.

Remember, there is little we can do to avoid an audit, but we can ensure we’re completely complying with the tax laws if we ever get audited. Some may believe this means paying excess taxes. With a strategic plan, there are ways to legally lower your tax liability so YOU can enjoy your hard-earned money. To discover what that means for you, click the link below, call 1-800-467-8152, or email info@ronaldgelok.com to chat about what a tax-reduction strategy can do for you.

SOURCES

[i] https://www.irs.gov/statistics/enforcement-examinations

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