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Understanding Tax Audits: What You Need to Know

Thomas Gogarty | Jun 14 2024 12:45
Tax audits can be a daunting prospect, but understanding the process can help alleviate concerns. At Thomas P Gogarty Jr CPA, we want to provide you with a clear overview of what happens during a tax audit and how infrequent they actually are. Here's what you should know:

1. Infrequent Audits
  • Rarity: Audits are relatively rare occurrences. Most taxpayers and businesses are not audited each year.
  • Automated Matching: The IRS performs automated matching to ensure that all your income reported on tax forms is included on your return. You might receive a letter to fix a mismatch problem, but this is different from an audit.
2. What Happens During an Audit
  • Notification: You will receive an official notice from the IRS or relevant tax authority informing you that your tax return has been selected for an audit. This notice will outline which specific aspects of your return are under review.
  • Documentation: You'll be asked to provide supporting documentation, such as receipts, invoices, bank statements, and other records that substantiate the income, deductions, and credits you claimed on your return.
  • Communication: Throughout the audit process, you may need to communicate with the tax authorities or their representatives to address any questions or provide additional information.
  • Resolution: Once the audit is complete, the tax authority will issue a final determination. If there are discrepancies, you may owe additional taxes, penalties, or interest. However, if your return is found to be accurate, no further action will be necessary. You also have the right to appeal the decision if you disagree with the results of the audit.
3. Audit Timing
  • Timing: Audits can happen at various times of the year, often depending on the type of audit and the tax authority involved.
  • For Businesses: Audits may occur throughout the year but are most common during or after the tax filing season.
  • For Individuals: Audits can take place year-round, with a higher concentration after tax season and throughout the summer months.
4. Random Audits and Targeted Reviews
  • Random Audits: The IRS and other tax authorities may conduct random audits.
  • Risk Factors: Specific returns might be selected based on risk factors or target certain industries or tax issues.
We hope this information helps alleviate any concerns you may have about audits. Remember, our team at Thomas P Gogarty Jr CPA is here to support you in the unlikely event of an audit and to ensure tax compliance year-round.

Schedule a Consultation/Meeting with us today to discuss any audit-related matters or specific questions you may have. We're always here to assist you.
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