As mentioned above, being selected for an audit does not always mean there is something wrong with your returns. But what is the exact chance of you being audited by the IRS? The New York Post reports that the odds of being audited in recent years have fallen to just .5%. However, this can be affected by various factors such as your level and type of income. People earning over $1M and those with income from a sole proprietorship, rental properties, partnerships, etc. have a higher chance of being audited.
Most individuals think that getting audited is an extremely stressful process where you’ll be interrogated by an IRS agent for hours on end. That is simply not the case. In fact, the IRS reports that about 75% of tax audits for the fiscal year 2018 were conducted by mail.
If the auditor has additional questions or needs to see additional documentation, they may request one of these audit options:
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If you receive an IRS Tax audit notice, the best thing to do is to read the audit notice carefully and follow the exact procedure. The notification will typically outline why you are being audited, what you are being audited for, and how you are being audited. If you are being audited via mail, be sure to provide the exact documentation that the IRS is requesting, and to answer all the questions they have regarding your return. If you are facing an in-person audit, contact your accountant or tax advisor who helped prepare your return, and perhaps even a tax attorney to represent you.
Regardless, it is in your best interest to pay the due taxes in a timely manner. Should you disagree with the results of your audit, you can request an audit reconsideration before you pay any taxes, penalties or interests that you plan to dispute. If you have paid your taxes or penalties but have decided to disagree with the result after, you can request a refund. If your request for an audit reconsideration is denied, you can request an offer in compromise. Although with a low chance, this settles your tax obligation for a fraction of the actual amount owed.
As stated on the IRS website, you have the following rights if you get audited:
There are a wide variety of tax audit penalties that can be assigned after an audit is conducted. This includes penalties for understating your taxes, overstating pension liabilities, and understating gifts or estates. The amount of the penalty will vary depending on your income, the discrepancy between returns, and other factors. In 2018, the average penalty in a by-mail audit was $6,356 while in-person audits resulted in approximately $26,307 in penalties.
In that case, you can request an Audit Reconsideration before you pay any taxes, penalties, or interest that you plan to dispute. If you already paid the penalty and then decide to disagree with the audit results, you can request a refund along with the Audit Reconsideration. If your Audit Reconsideration request is denied, you can request an Offer in Compromise. Although there is a low chance of the IRS issuing this, an Offer in Compromise settles your tax obligation for a fraction of the actual amount owed.
You don’t need to be nervous, frustrated, or scared about an IRS Tax Audit. If you received an IRS Tax Audit notice and don’t know where to start, call Sheppard Law Offices. Remember, in many cases, you were selected at random and not because of any wrongdoing.
At Sheppard Law Offices, we work with individuals and businesses nationwide who are facing IRS Tax Audits. We have 3 locations located in Ohio, all staffed with teams of professional tax attorneys that are up to date with all current tax law information. Visit us or call one of our locations in Columbus, Newark, and Mount Vernon, Ohio. Call (614) 523-3106 today!