Tax returns are filed every year by individuals and companies on all levels- federal, state and local. Smallest of discrepancies found in one’s tax returns can invite a tax audit from the IRS.A tax audit is when the IRS decides to examine your tax return a little more closely and verify that your income and deductions are accurate.
Sales tax audits are another type of audits. A sales tax is a consumption tax imposed by the government on the sale of goods and services. A business is liable for sales taxes in a given jurisdiction if it has a nexus there, which could be a person, a building or any such affiliate.
Likewise State tax audits are carried out. State income tax is a direct tax levied by a state on your income earned in or from the state. Like federal tax, state income tax is self-assessed.
Once the Audit process is done, there are three possible outcomes-
1.If the IRS is satisfied with the documentation you provide, then it will not change anything on your tax return.
2.If the IRS proposes changes to your tax return, you can either agree and accept the changes or challenge the agent’s assessment. If you agree, you will sign an examination report or a form provided by the IRS and agree upon some type of payment arrangement.
3.If you disagree with the findings, you can set up a conference with an IRS manager to further review your case or you can request a formal appeals conference.
·How to Pass a Tax Audit?-
The news of being Audited can be harrowing itself, but one must remain strong throughout the process and get one’s wits together. Some tips to pass a Tax Audi are-
1.Collection of required documents-
If you are selected for a field audit, the IRS will provide a written request for the specific documents they want to see. That may include receipts, bills, cancelled checks, copies of contracts or other legal documents, loan agreements, travel logs and employment documents.
2.Look out for additional revenues
If you accidentally forgot to include some revenue on your return or erroneously claimed deductions for which you weren’t eligible, the IRS will assess the additional tax due.
Various companies like TurboTax provide audit defence services, including features like-
·Responding to audit notices on your behalf
·Defending your federal and/or state tax return in audit hearings or meetings with auditors
·Providing access to and support from audit representatives who may be tax professionals, such as Enrolled Agents or CPAs
·Helping you resolve tax debt or identity theft associated with the audit
·Paying any penalties or fees if you’re being audited because of a preparer’s or software’s mistake on your return
A US Tax Audit is an experience that can spell disaster if not handled well. A wrong step can penalise you or worse, end you up in jail. This calls for professional help in the form of companies to handle your tax audit and support you through the process.
