The IRS will typically notify you by mail if they decide to audit your tax return. You may also receive a phone call from an IRS agent requesting more information or scheduling an in-person meeting. It’s important to thoroughly review all correspondence received from the IRS and respond promptly and truthfully to any requests for information or documentation.
What are some common red flags that might alert the IRS to audit my return?
There are several red flags that might increase the likelihood of your tax return being audited by the IRS. Here are some common ones:
1) Reporting high income: If you make substantially more money than you have in previous years or earn a top-tier wage, it could trigger an audit.
2) Claiming excessive deductions: Deductions that seem too large or out of the ordinary, such as donating an unusually large amount to charity, may also raise suspicion.
3) Failing to report all taxable income: If you forget to report some of your earnings, the IRS has many ways to cross-check and find out about them.
4) Running a small business: Business owners can be audited for deductions and expenses related to their business.
5) Claiming suspiciously high home office deductions: A home office deduction usually raises eyebrows if it seems abnormally high relative to other expenses reported on your tax return.
Keep in mind that these factors alone don’t necessarily mean that you will be audited. However, they could trigger additional scrutiny from the IRS.
Will I receive a notification if the IRS decides to audit my tax return?
Yes, you will receive a notification if the IRS decides to audit your tax return. The IRS generally provides written notice of an audit via mail or by telephone.
How does the IRS select which returns to audit?
The IRS selects tax returns for audit based on various factors that raise red flags or indicate potential noncompliance with tax laws. These include things like unusually high deductions or expenses, inconsistencies in reported income, and issues related to specific industries or occupations. However, the exact process used by the IRS to select returns for audit is not made public in order to prevent taxpayers from avoiding detection.
How far back can the IRS go when auditing my tax returns?
The IRS can generally go back and audit your tax returns for the past three years. However, if they suspect fraud or substantial underreporting of income, they may be able to look back further than three years. It’s important to keep accurate records and file complete and accurate tax returns to avoid issues with the IRS auditing your tax returns.
Who should I contact if I receive an audit letter from the IRS?
If you receive an audit letter from the IRS, you should contact a tax professional such as a certified public accountant or an enrolled agent. They can help you understand your rights and responsibilities during the audit process and can represent you before the IRS. You may also want to contact a tax attorney if legal issues are involved.