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The Dreaded Audit: Separate the Facts from the Fictions

Friday, September 14, 2018

Most people are terrified of getting audited by the IRS. The popular notion is that something is fraudulent on your return if you get audited. However, people get audited more often due to negligence than due to fraud. According to the IRS, out of the more than 200 Million tax returns filed each year, only 1 Percent are audited and out of those, only a fraction are fraudulent. Actual fraud convictions represent a very small percentage of audit results. Still, this number is significant based on the sheer number of returns that are filed each year. This doesn’t mean that you should take your return lightly or ignore IRS letters because you could get audited no matter how much money you make. We want people to understand audits are not always a bad thing and that you should be aware of why people get audited so you can avoid this situation.

Some of the most common reasons for IRS audits are:

  • Making mistakes, miscalculations & clerical errors
  • Drastic increases in income
  • Not reporting all of your income
  • Claiming too much in charitable donations
  • Claiming home office deductions
  • Claiming too many business expenses
  • Claiming rental losses
  • Claiming a loss for a “hobby” Activity

People tend to automatically think the worst about an audit. Fear of audits is usually attributed to thinking that the IRS is out to take all you own in the name of unpaid taxes. A better way to think about an audit is that the IRS wants to clarify the information you submitted. Many people don't know that there are many types of tax audits with varying levels of scrutiny and severity.

The four types of IRS tax audits are:

 1. Correspondence Audits – can be handled via mail to clarify a few aspects of your return

2. Office Audit – requires you to come to a local IRS office and involves providing documentation that can’t be handled through the mail

3. Field Audit – most serious audit that warrants an IRS auditor to come to your place of business to verify paperwork or records

4.Taxpayer Compliance Measurement Program (TCMP) Audit – the most detailed and thorough audit that checks every line of a return and all related paperwork

How to deal with audits of each type varies but one rule that holds true for all of them is that if you get a letter from the IRS for an audit – don’t ignore it! No matter what type of audit is requested, call Alliance Tax Solutions at 404-592-1227 for assistance immediately so that we can walk you through the process. All experts recommend seeking the assistance of an expert tax resolution firm rather than handling an audit on your own.

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Advocates of Love is the only children’s home to help orphan and vulnerable children in the Samana Province, Dominican Republic. Founded by Mike Clark in 2013, this charity has provided care and eduction for children in one of the most povery stricken areas.

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