Hundreds of thousands of Americans are audited yearly by the IRS. This may sound like a lot, but in reality, this is less than 1% of the taxpaying population. For the most part, the IRS auditing process is a fairly randomized computed-based selection model and almost anyone can be audited without really having committed any tax-related offenses. However, the IRS also audits those individuals who have suspicious activity in their accounts.
What increases the chances of being audited?
There are a few red flags which generally push the IRS to send the dreaded first letter and begin the auditing process. This includes:
- Individuals who report itemized business expenses
- Individuals who have not filed their taxes for a while
- Individuals who have unexplained income
- Individuals who earn too much ($10,000,000+ annually)
- Individuals who earn too less (those who report no income)
Basically, if anything looks slightly fishy, the IRS will likely start digging deeper for answers
What do I do if I have been audited?
Whether you have been trying to avoid your taxes or not, your first step should always be to contact a tax lawyer as soon as you receive the letter. Tax audits are very technical and complicated procedures and if a person wants to walk out of it without losing a lot of money then they need to get professional help. Unfortunately, a tax audit is not one of those things that will just go away on its own if it is ignored. In fact, taking a long time to respond or take action can make the IRS more suspicious and lead to more serious penalties-which will eventually have to be paid.
What choose a tax lawyer
There is a lot of paperwork and documentation which needs to be gathered together in order to ensure that the audit goes as smoothly as possible. A tax lawyer from Semler & Associates P.C, in Denver, CO can asses a person’s individual situation and according to what they find, they will offer advice on which forms and documents need to be collected.
When speaking in a general sense, most tax audits will require the following documentation to be collected:
- Receipts of expenses
- Canceled Checks
- Legal papers
- Loan agreements
- Logs of diaries
- Theft or loss documents
- Schedule K-1
Once all the documents have been collected and the relevant forms have been signed appropriately, a tax lawyer will be able to file the paperwork with the IRS and then wait for correspondence. Having a tax lawyer will also save a person a lot of time since they have years of experience with auditing. They can respond to the IRS in a timely manner and in turn help a person minimize or even erase the penalties which they are being subjected to.