Any dealings with tax issues or concerns can be stressful. Yet few things in life evoke the fear of an audit letter from the IRS. You may worry about the financial implications and whether you will face punishment before even considering how you should handle the process. Luckily, you do not have to navigate the complexities of the Baltimore IRS tax audit process alone. A skilled tax law attorney could help you understand what to expect and guide you through the preparation to ensure the process goes as smoothly as possible.
Learning you are being audited after you have done everything in your power to handle your taxes correctly can be unnerving. Yet, there are many ways the IRS chooses to start the process of an audit on Baltimore accounts. In most cases, audits are chosen because of the following situations.
The IRS computer system uses a special algorithm designed to recognize statistical probabilities that a return was filed with inaccurate information. The system may flag returns that have an expense and income ratio that suggests unreported income or returns that do not match the available information from other data (such as W-2s or 1099s).
If a business you are associated with is being audited, you might be next. During an audit, transactions are investigated, which can involve other taxpayers (such as partners or investors). When this occurs, it is very common for the IRS to open other audits to determine whether all payments were properly reported.
When it comes to data entry and math, it is crucial to always recheck your numbers. Errors on your tax return appear no different to the IRS than intentional fraud. A return that does not match other financial documents can raise red flags for auditors, and a simple explanation is not always enough to make an audit go away.
Once you have been chosen for a tax audit, the IRS will contact you by mail with information about how you will be required to respond. IRS audits are conducted through three different methods. Your letter will explain the type of audit in Baltimore that you can expect and how you should proceed.
Correspondence audits are the least severe type of audit and the most common. The audit is conducted solely by mail, in which the IRS requests specific documents to support items in your return. If you are unclear about your responsibilities or your ability to access the documents, a skilled attorney could help you prepare your package for the IRS.
This method requires you or a representative to personally appear at the IRS to meet with an auditor. Your audit notice letter will explain what documents you are required to bring to the meeting. However, you can also bring additional information you believe will support what was reported on your tax return.
This method involves an IRS representative coming to your home or business to conduct the audit. Field audits are the most intense, requiring an interview and complete review of your financial records. An agent may also look closely at your lifestyle, business activity, and income to determine the accuracy of your return.
No matter what type of audit you are facing, you have the right to legal representation during the Baltimore IRS tax audit process. An experienced lawyer could help you understand your rights and responsibilities so you can adequately prepare for your audit. Whiteford Tax Defense has substantial experience supporting residents and business owners through the audit process. Contact us today to schedule a consultation.