New Report Delves into IRS and Audit Trends: 3 Things to Know
One of the leading resources for public accountants, Accounting Today, recently released a report analyzing some of the top trends when it comes to tax audits. According to the report, the Internal Revenue Service (IRS) conducted 991,168 tax audits in 2018.
Three of the more important takeaways from the report include:
- The IRS will likely scrutinize any EITC. Taxpayer advocates have scrutinized the government for being too harsh on taxpayers who claim an Earned Income Tax Credit (EITC). As a result, anyone claiming an EITC on their tax returns is wise to keep paperwork to support the claim.
- Penalties are prevalent. According to the report, the IRS assessed 58,266 taxpayers with an accuracy penalty in 2005. In 2018 that number jumped to 606,121. This shows the agency follows through when it sends notification of an audit. If errors are found, the taxpayer will face penalties.
- Field audits are expensive. It is wise to seek legal counsel if your business is the subject of a field audit. The IRS conducted almost 250,000 field audits last year and the average tax bill was a reported $85,400. An attorney can help represent your interests during the audit and advocate for your rights, potentially lowering or even defeating the IRS’ claims for an additional tax bill.
Although field audits should signal the need for an attorney, any taxpayer with significant assets should take a notification of an audit seriously. Depending on the details of the allegations, the government could claim criminal wrongdoing. Defend your interests by seeking legal counsel experienced in complex tax matters.