Have you found a letter from the IRS for audit in your mailbox? Before getting panic, you should thoroughly go through the letter to find out what exact information is required by the IRS. The tax authority is considered as one of the most brutal collection agencies so it’s obvious that if you’re receiving any correspondence from them you will definitely get worried. Once you know what information you would need to provide to the IRS, your job is very easy. You just need collect the documents to prove that your tax relief and deductions were genuine. However, in case, IRS has sent you a letter for audit, it is a point of concern. Therefore, you should know how to prepare yourself to face IRS lawyers and their complicated questions.
Tax audit is a scary process however, you cannot avoid it. First thing that you should understand is the “red flags.” Since you have ignored these red flags, letter for audit is there in your mailbox. Hence, you should take some time out to research and analyze the reasons of the audit. Some of the important red flags are claiming unnecessary charitable contributions, filing multiple exemptions, excessive home office deductions and having offshore accounts. If you can find the correct reason for the audit it will get easier for you to understand the reason of the audit.
Mathematical calculations are another thing that you should look out for. Majority of taxpayers prepare their taxes at the last moment. So, in hurry they tend to make silly calculation mistakes. To you these errors might sound small and negligible but they are affecting your total tax obligation. Before filing your taxes, you should recheck the calculation. Unreasonable deductions also put you under the spotlight of IRS systems. If your deductions are over the limit, it will go against you. Whatever deductions you have claimed, you must have supporting prove for that. In case, you don’t have documents or invoices to prove your expenses you should not claim that deductions. Therefore, it is always recommended that you should not loose bills, receipts and invoices. The expenses of self employed tax payers are closely checked by the IRS. If you are self employed, you should check the legitimacy of expenses and deductions you are claiming.
The income and expenses you are declaring in your tax return must justify your lifestyle. In case, you fail to justify, IRS will get a tool to use against you. Therefore always keep a close eye on your income and expenses. These are the common things that you should keep in your mind to avoid tax audit however, above all this know your rights as a taxpayer is the top priority.