Auditing and You: What Every Taxpayer Needs to Know

From a tax perspective, an audit is one of the most challenging situations a taxpayer may confront. Whether you're facing an audit now, or you're simply concerned about the possibility of an audit, there are several things you need to know.

Each year, the process of filing taxes fills many Americans with dread and frustration. It's no secret that tax season can be a very stressful time for many taxpayers. The process of filing and paying taxes can be complicated and time consuming; however, it's the possibility of being audited that tends to make most taxpayers uncomfortable and nervous. Each year, approximately one percent of taxpayers are audited by the IRS. Audits may occur in person or via mail, and either type can be a difficult situation to handle. If you're facing an audit now, or if you're concerned about the idea of an audit, there are several things you need to know.

Who is at risk for an audit?

First off, keep in mind that some taxpayers are more likely to be audited than others. If you made more than $200,000, for example, your chances of being audited increase. Similarly, taxpayers who make certain claims or take certain deductions may be more likely to be audited. If you make a large amount of charitable deductions, you may be more likely to be audited than if you do not. This also applies to claiming dependents on your tax return. Although there are several factors that may increase your odds of being audited, the reality is that the percentage of individuals who are audited is still quite low. Thus, even if your return does exhibit one of these increased risk factors, you don't necessarily need to begin stressing about the possibility of an audit.

What should you do if you are audited?

The IRS may request more information from you if you are audited. An auditor may meet with you and request documentation that proves your tax liability or deductions that you claimed. In some cases, you may be audited by mail and never meet with an IRS representative. It's important to respond promptly if you are contacted by the IRS. Some taxpayers avoid responding to IRS letters, because they feel it is stressful to deal with; however, this can lead to penalties or fines imposed by the IRS, especially if you fail to prove that your tax return was factual.

How can an attorney help?

Your attorney wants you to have the best possible outcome from your situation. Not only can your attorney advise you as to your rights in this situation, but they can also represent you when it comes to facing legal charges or fines in regards to the audit. In some cases, an attorney can help you with an Offer in Compromise, or OIC. This means that you'll be required to pay less than your actual liability with the IRS. Typically, you may request an OIC in cases where you are unable to pay the full amount or doing so would cause an incredible economic hardship. Your lawyer will advise you as to whether this is an option for you, as well as what your other choices may be moving forward.

Don't wait to speak with a tax attorney who can help. Reach out today.