A tax audit is a review of financial documents by the IRS or Maryland Comptroller’s Office. Audits are often triggered by errors, discrepancies, or red flags in the tax filing process. Individuals and businesses should be concerned about tax audits, even if they feel they have nothing to hide.
While it is not possible to ensure you never face an audit, there are some things you can do to avoid triggering an audit. If you are filing taxes, taking steps to ensure accuracy can help reduce your chances of being targeted. A knowledgeable attorney could assist you in preventing a tax audit in Baltimore.
Certain actions or errors may trigger an audit. These include underreporting income, claiming unusually high charitable donations, or reporting high home office deductions. Other triggers include discrepancies in reported income and unfiled or late tax returns. Occupation or business type has a lot to do with getting audited as well. For instance, those who own cash-heavy businesses may be at risk. Self-employment and gig economy income are also at higher risk.
Individuals and businesses in Baltimore can save documentation to reduce audit risk. This includes receipts, invoices, mileage logs, and other financial paperwork. Many people find it helpful to use digital bookkeeping tools to compile everything in one place. It is also important to include income from rental properties, side gigs, and other projects in the final figures, but to claim only what can be substantiated.
A Baltimore tax attorney could help prevent audits or respond to the IRS if one occurs. One way an attorney does this is by reviewing state and federal tax returns for any potential red flags. For small business owners, a tax lawyer could provide significant guidance. For instance, they can advise on proper tax classification and documentation for small businesses and self-employed individuals.
A tax lawyer could also provide representation during IRS or state audits that do arise. This may involve communicating with tax authorities on the client’s behalf, gathering necessary documentation, and responding within the appropriate deadlines. A local tax attorney is particularly helpful because they are familiar with zoning and business licensing protocols. They are also aware of state and city-level taxes and fees.
In some cases, getting legal help is especially prudent. For instance, tax filers should consider getting legal assistance if they have a history of audit issues or are in a high-risk tax situation. These situations include gaining a recent inheritance, owning complex assets, or being self-employed. Anybody who has concerns about past filings or deductions or who has received an audit notification should secure legal counsel right away.
Individuals and business owners can minimize their audit risk with careful, accurate tax practices. Anyone can consult a lawyer to learn more about defending against an audit.
If you are concerned about audit risks or need help preparing your taxes, a local lawyer could provide personalized, proactive support. Preventing a tax audit in Baltimore can prevent further financial damage, especially with early legal support. Contact a lawyer to schedule a consultation.