Receiving a notice from the Internal Revenue Service (IRS) about an audit is not the most calming situation. Tax issues carry significant consequences, which you may have seen from your loved ones or celebrities. However, an IRS audit does not always mean you are in trouble.
Here is what you need to know.
You may have been selected randomly
The IRS uses different methods to choose who to audit, and one of them is random selection and computer screening. With this option, the department will compare your tax returns against “norms” of similar ones. If your records have some differences from the developed “norms”, you may receive the audit notification.
During the audit, you will provide information to justify the differences, and you can continue with your life.
You are connected with people with tax issues
If your business partner, investors or any other taxpayer your records are connected to is selected for an audit, the IRS may extend the examination to your returns. They do this to obtain adequate information about the case to give an appropriate verdict.
Should you protect yourself?
Even though you may not be in trouble, you should protect yourself. Upon receiving the IRS audit notice, contact the auditor assigned to your case to obtain more information. They should inform you why you are being audited and the documents to submit.
It will also help to ask them what to expect during the audit. When you are well-informed and have needed documents, you can have a smooth experience.
Being audited by the IRS does not always mean you broke the law, or are going to jail. Nonetheless, it will help to get legal guidance to make informed decisions.