How familiar are you with individual tax audits and business tax audits? When it comes to doing your taxes, it can be overwhelming trying to ensure that every little detail is precise and accurate. It is really necessary to get each tiny nuance exactly correct? The truth is, these small specifics could be the only things standing in between you and a tax audit. Let’s take a look at what tax audits are, why they happen, and how Central Tax Law can help!
What are Tax Audits?
Essentially, tax audits are a way for the IRS to perform checks and balances to ensure that individuals and businesses are paying the proper amount of taxes. These are necessary in order to narrow the tax gap, which is the difference between what the IRS receives and what they should have received. These tax audits can be performed completely randomly, or individuals and businesses can be selected based on a pattern of suspicious behavior.
When selected for an individual tax audit or a business tax audit, additional paperwork and information are typically required in order to prove that the information provided on the tax return is fair, complete, and accurate. Based on what the reasons are for your selection, your tax audit may fall into one of three categories. The first is a mail audit, where no in-person contact is necessary, you simply receive a letter asking for additional documentation. The second is an office audit, which takes place in person at an IRS office. The third is a field audit, which typically occurs within your home or business. During these audits, it’s best to have as much documentation and information available so they can go as smoothly and quickly as possible.
Why Do Tax Audits Happen?
While some tax audits are truly random, there are a few suspicious behaviors that may land you or your business under the close eye of the IRS. First on this list is making math errors. Math may not be everyone’s forte, but there are plenty of available tools and resources to ensure that you are getting your numbers right. It’s always a good idea to use what you have at your disposal!
Another action that may lead to an audit is failing to report income. Sometimes, individuals and businesses try to avoid paying as much as they are required to by claiming they earned less money. However, the IRS has ways of finding this out, and if you are caught doing this, you could be in serious trouble.
Claiming too many charitable donations, deducting too many business expenses, and claiming home office deductions are all additional behaviors that may leave you facing an audit. It may be tempting to boost up your expenditures, but doing so can end up costing you more money in the long run if you get audited.
Lastly, avoid using neat, round numbers. While it may look nicer on your taxes to claim a $750 expense as opposed to the $742 that it actually cost, this can catch the attention of the IRS and be flagged as inaccurate, and a reason to look even further into your taxes.
How Cental Tax Law Can Help
Whether you are currently facing an IRS audit, or you simply want to prevent tax audits in the future, Central Tax Law can help. Our team is knowledgeable about current business tax and individual tax laws and can help you gather information and documentation for your audit case, or prepare your taxes in a way that will reduce your chances of being audited.