No one wants to receive a letter from the IRS, but unfortunately, it happens to many people yearly. If you’re one of the unlucky few who gets that letter, the prospect of an IRS audit is not pleasant.
However, if you know what to expect during an audit, you can make the process as smooth as possible.
Why does the IRS conduct audits?
The IRS conducts audits to verify tax return information and ensure that taxpayers comply with the tax laws. The IRS may select a return for an audit because it contains errors or is in a higher-risk category. For example, taxpayers who report income from investments or claim certain business deductions may be more likely to be audited.
The IRS will notify taxpayers by mail if their return has been selected for audit. As part of an audit, the IRS may request documentation of income and expenses. This documentation may include bank statements, receipts, invoices, and other records.
If the IRS finds that you owe additional taxes, you will be responsible for paying the amount owed, plus interest and penalties. Failure to pay your taxes can result in severe consequences, including wage garnishment, seizure of assets and even jail time.
If you are facing an IRS audit, it is important to consult with a legal representative. An audit can be a complex and time-consuming process, and you want someone on your side who understands the ins and outs of the tax code. They can help you understand your rights and responsibilities and work with the IRS to negotiate a favorable outcome.