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Tax season: How to survive being audited by the IRS

It’s tax season again, which for most of us means a few hours of hunting down our W-2s and hoping for a nice refund. Once you’ve filed, you’re off the hook for another year…unless, of course, you get Audited.

If this happens to you, don’t panic—being audited doesn’t mean you’ve done something wrong or that you owe penalties. As long as you filed your Taxes correctly and have the receipts to back it up, you’ll be just fine. Fortunately, the Internal Revenue Service (IRS) only audits a tiny fraction of tax returns each year—less than 1%—so the odds are pretty slim you’ll be called out. But if you are on their list, there’s not much you can do to stop it. So just in case, you end up being audited this year, here’s a quick list of things you should know:

What is a tax audit?

A tax audit is just the IRS’s way of verifying that the taxes you’ve submitted were accurate. If you can prove that your taxes were filed correctly and the numbers you reported were true, you’re all set.

If I’m audited, does it mean I owe the IRS more money?

Nope, not necessarily. If you filed your taxes correctly, you won’t owe a thing. But if the IRS finds an error, intentional or otherwise, you may end up owing back taxes or penalties.

How can I decrease my chances of being audited?

File your taxes

This is the biggest one. If you haven’t filed your taxes for a year or more, you’re essentially begging the IRS to audit you.

Record every payment

Your income is a big piece of what makes you “auditable,” so if your income is significantly lower or higher than the average household, it will increase your chances of getting audited.

While you can’t exactly change your salary, you can make sure you’ve entered everything correctly. If you have multiple revenue sources (for example, if you freelance), it can be hard to keep track of all the income you earn in a year, so you’re more likely to leave out a payment. Keep good records and make sure you record every payment.

Check your deductions

If you made any significant charitable contributions, you’re eligible for some well-deserved deductions. However, if the deductions are suspiciously high, you’re more likely to get audited. (We’re not saying you shouldn’t give generously, but if you gave 80% of your income to charity last year, you should expect a visit from the IRS.) If you’re claiming a home office deduction, make sure you’ve actually designated a section of your home strictly for business purposes.

Keep spotless records

The IRS can audit you as far back as three years, so make sure you keep at least three years’ worth of tax returns and files. It’s also a good idea to keep a folder of your paystubs and categorize your bills and receipts from all work purchases during the year.

What are the different kinds of tax audits?

Mail audits: These are the most typical and the least invasive kind. They may be limited to a question from the IRS about a specific deduction or a charitable gift, and once you submit your records, you could be all done.

Office audits: During an office audit, the IRS will ask you to visit them at their offices, and may ask you to bring certain files.

Field audits: If something from your records looks suspicious, the IRS may send someone to your home or business to look things over.

What should I do once I’m notified?

Don’t ignore the notice—that won’t make it go away. Get in touch with a tax attorney and secure legal representation, and be honest with your IRS auditor. Like most things in life, honesty is the best policy.

Solid preparation and organization will get you through any audit. If you have any questions, you can always Ask a Lawyer for help.

The post Tax season: How to survive being audited by the IRS appeared first on Rocket Lawyer.



This post first appeared on Rocket Lawyer - Everyday Law, please read the originial post: here

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