April Article: Will there be an Audit?

         Now that Tax Season is over and you have filed your Tax Return or received an extension, it can seem to be a time to rest. However, some may be concerned about a potential audit in the future. That is never an enjoyable process, but let us take a closer look at what the odds actually are.
          In reality, just over 0.5% of all individual Tax Returns are selected for an audit. Most people do not need to have a morbid fear of this occurring to them. But there are different factors that can change this percentage. For example, those who do not own a business, claim no Tax Credits, or make less than $200,000 have about 0.2% chance of getting an audit. These individual tax filers will have simple returns that are less likely to set off any IRS red flags. The opposite can also be true.
          Areas of Tax Credit, business and rental income, along with the forms that go with them, call for a lot of attention to detail. When these situations occur there is the potential for abuse and fraud. This will make the probability of an audit rise. If a Taxpayers income is considered to be very high or very low that will attract attention. The average income will vary from year to year, but the basic principle will stay the same.
          What happens if you are one of the special people who is selected by the IRS to be audited? Despite what you might imagine this process to be like, the majority of the time the Taxpayer never has to directly speak to an IRS agent. Often they simply want to see proof of what was stated in the Tax Return. The Taxpayer always has the right to seek representation when dealing with the IRS such as an attorney or an Enrolled Agent. When dealing with matters regarding a business, quite often it will lead to a face-to-face meeting.
          This is based on information gathered from the last 2 years. Every year will be different, but we can be confident that the general principles will stay the same. Moving forward there are big changes on the horizon and only time will tell how that will affect the rate of tax audits.
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