Every year when you submit your taxes, you likely think something along the lines of – I hope this is not the year that I get audited. Individual returns and business returns can be audited by the IRS, but you should keep in mind some simple facts:
● Audits are fairly uncommon: The most current report from the IRS indicates that just under 1% of all tax returns are audited. While you cannot assume it will never happen to you, it is not likely, especially if you submit returns that are truthful and error free.
● The most common type of IRS audit is by mail: When you think of an audit, you may assume that this interaction is completed face to face. However, about 75% of all audits are completed entirely by mail. This may involve providing more detailed information about a part of your return or answering a few questions, but you will have time to think about your response before you submit. Please note that the IRS will communicate with you directly by mail – emails and phone calls threatening an audit are scams and not from the IRS.
● Audits can be appealed: You always have the right to appeal an audit and you can hire a tax professional to help you should you get to this stage in the process.
If you are still concerned about a potential audit, here are some suggestions that can reduce your risk:
1. Make sure you do not submit your return with any typos or keying errors. The IRS often matches information from individual W-2 forms and/or 1099s to returns. When they note a discrepancy, it can trigger an audit. So, go over your return carefully to ensure that there are no errors.
2. Keep all of your tax documents. Very often an audit simply requests additional information from you. Keeping your documents a minimum of 3 years but up to 7-10 years is very helpful and can often be all that you need to satisfy the issues you are faced with.
3. Hire a professional tax firm: Working with a tax professional reduces the risk of errors on your return and/or issues that may make the IRS take note of your return. A tax professional has information about the most current tax law and can ensure that your returns are complete and accurate. Also, when you work with a tax firm and are audited, you have built in audit protection. Your tax professional can guide you through the audit process.
For more information about tax support services, call Havig Tax & Consulting at 763-325-4400.