What is the Examiniation (Audit) Process?
An IRS Examination is a process of reviewing and examining a taxpayer's accounts and financial information to determine whether the total amount reported is correct. Examinations include hiding income overseas, filing false tax returns, abusing tax-exempt organizations, misusing retirement plans, concealing ownership of a company, submitting false wages or income, and abusing trusts. In practice, the scope of IRS investigations can be large or small in an accountant's experience. In terms of financial information, we have seen the IRS pull out 10 years of credit card information and inquire about the source of funds one by one, and one cannot help but be impressed by its meticulousness.
Selection of Targets for Checking(Note)
If a tax return is randomly checked, it does not necessarily mean that the return is incorrect. How the IRS conducts random checks includes the following five methods:
Length of Time for Audits
The length of each audit varies depending on the type of audit, the complexity of the items being audited, and the ease with which the information can be obtained.
Required Records
The IRS will provide a written letter to the taxpayers regarding the required documents.
The U.S. tax law obligates the client to keep records of the source of the figures on the return at the time the return is prepared. Generally, the records mentioned above should be kept for three years from the date the tax return was filed.
Results of Audits
There are three types of checking results:
What happens if the taxpayer agrees to the IRS's proposed change?
If the person agrees to the results of the audit, the person will be asked to sign a document, which will be in a slightly different form depending on how the audit was conducted.
What happens if the client does not agree with the result of the search?
The client can request a meeting with the IRS agent'ssupervisor to initiate a further review. In addition, the taxpayers can request a summary mediation or appeal the results of the audit.
The IRS website has a collection of frequently asked questions about tax audits.
IRS audits | Internal Revenue Service
Conclusion
Taxpayers should make it a habit to keep their tax returns. If you hire an accountant to help you file your tax return each year, you should confirm the contents of your return before filing. In this way, if the IRS requests an audit, you will not be left with no information to provide.
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