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Getting Audited By The IRS

The words "getting audited by the Internal Revenue Service (IRS)" strikes fear into the healthiest of hearts but unless the IRS believes that you have misstated information on your tax returns, there is really very little to fear.

An audit is an examination of a taxpayer's tax returns by the IRS to determine if reported information is correct. If you are audited, there is a Tax Payers Bill of Rights protecting the taxpayer against unfair treatment by IRS auditors.

Lately, the number of audits have been increasing but the odds are still low that any particular taxpayer will ever be audited. But some professions have a higher audit rate than others.

For the average taxpayer, scrutiny is bestowed on certain returns that have numbers that don't add up or information on the returns does not match up with W-2's and 1099's submitted by employers, brokers, and other's who have reported making payments to the filer.

Certain unqualified deductions on individual incomes, and tax shelter losses, large donations to charity that don't match income, prior audits, and excessive business expenses are red flag causes for audits by the IRS.

The audit of a taxpayers returns can be held at the local IRS site or it may be held at the taxpayers office, home, or place of business. Where the audit is held usually depends on the complexity of the audit.

  1. If what the audit finds is minor, it may be handled through the mail by correspondence.
  2. Audits of individual tax returns are generally handled at the IRS office.
  3. Audits of businesses and self employed individuals are usually conducted at the taxpayers office or place of business.

The taxpayer may authorize someone else, an attorney, an accountant, or the tax preparation services who prepared his tax returns, to represent him at the examination and not appear in person.

But if it is decided that it is best that they see you in person, the IRS can issue a you an executive summons requiring you to make a personal appearance.

Audits are conducted within 3 years of the particular year that is being questioned. But if the IRS concludes that there may have been fraud or other irregularities, they may go back to as many as 6 years.

The best defense against being audited is to prepare, or have your tax returns prepared, as honestly and thoroughly as possible. Always keep records of any items that you intend to claim as deductions on your taxes and all tax records should be kept for at least 3 years after the returns have been filed, simply for your protection if you are ever audited.

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