Are you facing a tax audit? Do you know what to expect? Here are some important facts about income tax audits. The IRS and state tax authorities look into your tax returns. A tax audit can lead to penalties and interest if the information provided by you does not match the facts found in the audit. This information can help you prepare and avoid further trouble. Listed below are some things you need to know before you are audited. Read on to learn more.
First of all, don’t let yourself get stressed out. You may be tempted to talk your way out of this, but it won’t help. Don’t rush into an explanation because anything you say could be used against you. You can request an extension for 30 days, but it’s not likely you’ll get one. If you accept the audit’s findings, it will be concluded without further changes. Alternatively, you can try to settle the issue on your own.
During the audit, the IRS may ask you to produce documents that support your claim. Some items that you have in your records may not be on the radar of an auditor. You should consider this carefully and document your answers. Otherwise, you might unintentionally give the auditor an excuse to expand the scope of the audit. If you’re not prepared for this, the IRS will just send you to a collection agency for further scrutiny.
Depending on the type of audit you face, the IRS may conduct an office or field audit. In the latter, the audit will be in your home. You must be prepared to answer the questions posed by the auditors. You will also be asked to provide information about any unexplained bank deposits, other income, and outside businesses. When the IRS contacts you, it will provide you with instructions. Having a lawyer on your side will ensure you avoid criminal tax admissions.
You can also appeal a tax audit if you believe you were unfairly accused of evading taxes. An IRS tax audit can result in a large increase in taxes and possibly a federal prison sentence. In many cases, people who fudge tax returns may face a tax audit. If you’ve lied about your income, you might be facing a financial crisis and could be forced to file for bankruptcy. If you disagree with the decision, you can file an appeal to the tax agency.
The IRS will most likely investigate if you filed false tax returns, but it’s rare for an IRS audit to lead to criminal tax prosecution. However, there are other ways to protect yourself and your assets. Tax audit lawyers have experience in handling these situations. An experienced tax attorney will know what to expect from an auditor and how to respond to them effectively. The IRS has computerized statistical protocols that help the IRS detect reporting irregularities. The software also flags a return if it has some irregularities. If the audit finds any information, an attorney can contact the tax department on your behalf.