Have you recently received tax notice from the IRS and are terrified what to do about it? Well, you have come to the right place for all your queries. Not all tax notices by the IRS are related to audits.
The notice letter given by IRS will have all the reasons for the contact and give you instructions how to handle it.
What is a Tax Audit Support?
A tax audit is an examination of your tax return by the Internal revenue Services (IRS) to verify if your deductions and Income tax are accurate.
Reasons for your notification by IRS:
- You changed your return
- You have a balance due
- They need to verify your identity
- They require additional information
- You re due larger or smaller refund
- A notification stating there will be delay in processing your return
Now when you know the reason for the notice, let’s get going on more information.
If you receive a notice stating your taxes are being audited:
A tax audit is an accounting examination where the IRS examines your business or individual financial records to ensure you filed your taxes accurately. But if the IRS finds some errors, you’ll have to pay the re-calculated return amount and any interest penalties.
Also Read – Accounts Receivable
How will the IRS conduct the audit?
The IRS manages audits through mail or in-person interviews to review your records. The interview can be at IRS office or at taxpayers home, business or accountant office. All instructions will be provided in the letter by the IRS.
There are three main types of Audits:
- Mail Audits:
Here, you receive the notification for your audit via mail. A mail audit is the simplest type of examination and you don’t require to meet an auditor in person. Here, the IRS requests for a particular kind of documentation to substantiate various items you report on your tax return. For example, you have claimed a donation of $5,000 , the IRS may ask you for a letter of proof for your deductions.
- Office Audits:
This audit is conducted at the local IRS office. This is an in-depth audit and it usually follows with questioning by an audit officer about information on your tax return. You will be asked to bring books and records for your business or your personal bank statements and receipts. The best part is you have an advantage of bringing along an accountant and a lawyer to represent you at these meetings.
- Field audit:
This is the broadest kind of audit IRS conducts. This can be done at your home to your business address. Field audits take place when IRS questions deductions more than two. It is a thorough possess and it covers all sorts of returns.
If the IRS is satisfied with your audits, there will be no change in the tax return. In case, IRS asks you to change the tax return, you can either agree or challenge the agent’s assessment. If you agree, you need to sign an examination report or other form provided by the IRS and establish some type of payment arrangement. But if you disagree, you can set up a conference with an IRS manager to further review your case or you can request a formal appeals conference.
What do you need to provide?
The IRS will provide with the written documents they require to see. The IRS can see electronic records that are produced by the tax software. The law requires you to keep all records you used to prepare your tax returns (three years from the date of tax return was filed)
Some record IRS may ask you to show:
- Cancelled checks
- Legal papers
- Loan agreement
- Logs or diaries
- Medical and Dental records
- Theft or lost documents
- Employment documents
- Schedule K-1