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IRS Audit

Any form of communication from the IRS is likely to strike fear into the recipient. None, however, are as feared as the dreaded IRS audit.

IRS Audit
IRS Audit

An IRS audit means they’re looking more closely at your personal or business records, going over them line by line, to make sure the reported income is correct.

Even the most carefully prepared tax return falters under scrutiny, even by the most fastidious CPA. Thus, IRS audits are best to be avoided, but in the off chance you find yourself under their watchful gaze, it’s best to be prepared. And knowledge is the first step towards preparation.

What Happens During An IRS Audit?

During an audit conducted by the IRS, every agent must review four basic areas.

  • Income: For the income tax assessment, the agent will want to see bank statements, records from sales of property, documentation of cash prizes, alimony and pension received, and federal and state tax refunds.
  • Records Of Prior Audits: In the instance that the individual has been audited previously, the IRS agent will want to see these records, as well.
  • Previous Years Returns: The agent will check to make sure that the taxpayer has paid this, and prior, year’s returns on time, and whether amendments were necessary
  • Penalties: Finally, the IRS agent will inquire whether or not the taxpayer has paid penalties on previous years, before deciding on this year’s

The Process Of An IRS Audit

The process begins with a taxpayer receiving a letter automatically generated from the IRS. If you DO get a letter from the IRS, don’t panic! The news is not necessarily bad. They could be writing to let you know of an automated adjustment notice, or CP2000, letting them know they owe additional taxes, perhaps due to clerical or computer error.

If you do get correspondence from the IRS – open it immediately! Although it’s scary, it’s better to deal with things now than accruing additional fines and penalties.

To find out more about how we can help get you in good standing with the IRS, contact us today!

In the instance that an individual is scheduled to be audited, the first thing to do is to contact the agent assigned to your case, and schedule a good time to meet. It’s up to the taxpayer to prove that their return is correct, showing evidence of any questionable deductions and evidence of income. In light of this, if you even suspect you may be audited, it’s important to have well-organized documentation.

Some of the questions you should expect the IRS to ask include:

  • Did you report all of your income?
  • Did you record your business sales and all of your receipts?
  • Are your lifestyle expenses in line with your reported income?
  • Did you claim any large business write-offs, such as entertainment?
  • Were all reported travel expenses business related?
  • Do you pay payroll taxes on time?
  • Did you report all cash transactions?

The agent will then complete the audit and issue a statement for how much the taxpayer owes.

Once the audit is complete, the agent will most likely ask the taxpayer to sign a waiver of the right to appeal.

In the case that an IRS agent asks you to sign a waver, there are three things you can do:

  • Pay the additional tax – If you end up disputing the additional tax, you can file for a refund
  • The taxpayer requests an appeal with the local appellate division
  • The taxpayer signs the waiver and pays the additional tax

To find out more about an IRS audit, and how our tax professionals can help, contact us today!

chicago cpa
chicago accountant
chicago cpa
chicago accountant
https://www.glgaccounting.com/wp-content/uploads/2016/08/glg-accounting-logo.png GLG Accounting
400 Central Ave, Suite 340B Northfield, IL 60093
Phone: (312) 754-9377 URL of Map $100-$2000

Solid Chicago CPA Accountant For Getting Result | GLG Accounting https://www.glgaccounting.com/wp-content/uploads/2016/08/glg-accounting-logo.png $200-$2000 GLG Accounting is a Chicago CPA firm that offers a wide variety of services. So, if you need a reliable Chicago accountant, you need to give us a call!
400 Central Ave Suite 340B Northfield, IL 60093
Phone: (312) 754-9377