Given the statistics of tax audits, it is more likely than not that that you will be audited at some point in your lifetime. We all seem to know someone that has been audited and had a horrifying experience, thus creating a fear of being audited. In reality, with some simple preparation and the right tax professional on your side, you can reduce the chances of being audited.
How the IRS selects returns for audits
The IRS uses several avenues for determining an audit:
- Computer Scoring: Each submitted tax returns is scored using two programs, the Discriminant Function System (DIF) and Unreported Income DIF (UIDIF). The Discriminant Information Function System (DIF) score alerts the IRS of changes in tax due, based on past IRS filings. The Unreported Income DIF (UIDIF) score alerts the IRS of unreported income. The higher the score, the higher the chances of being audited.
- Related Individual/Entity Audit: When the IRS audits a tax return and that return involved transactions with other taxpayer and that return had an issue it is likely that anyone that is related to that individual or entity will end up audited as well.
What to do if you are being audited
The IRS always communicates by sending letters advising you of an audit. It is important to understand what these letters mean, what actions need to be taken and the time frame of the audit. Once the first letter is received, you should contact a tax professional to address the issue for you. It is important to always be prepared for an audit to avoid any issues. If you have received an IRS Audit Letter, contact us as soon as possible at 1-800-518-8964.
How to obtain tax audit assistance
Audits can be stressful and time consuming, so having a tax professional to give you audit assistance and be your representation during the audit process can increase your chances of getting a far better outcome than attempting to go at it alone. At Tax Champions, we will absorb the stress and give you the peace of mind that your audit will be a smooth process.