The IRS conducts audits on taxpayers to ensure they are reporting information accurately, following laws and that information reported is correct. It can be an extremely stressful situation and roughly one percent of taxpayers are audited. So while this makes your chances of getting a letter from the IRS pretty low, it is still something to think about. Those who make millions and those who report very little are some of the most common to be audited. However, it is still important to be aware during your Denver tax preparation. Below are facts about IRS audits and what you can do to avoid it happening to you.
In the event you are contacted for an IRS audit, your premier Denver tax preparation professions at Bloch, Rothman & Associates can help. With over 20 years of quality experience of representing clients through audits, we will be your go-to experts and you can rest assured we will get you through the experience. Fill out this form
- Contact Methods of Notification: The IRS will contact you through mail to let you know you are being audited. They may contact you via phone as well, but there is always a letter that will be sent in the mail to confirm the audit. You will absolutely under no circumstance be emailed about an audit, so be wary of that to avoid a scam.
- Types of Audits: Upon being contacted, there are three types of audits that can occur. You may simply be asked to further explain information that may have an amount to pay due to a calculation error. The next type of audit is via interview. This means you will have to go to an IRS office with receipts and documentation needed for the audit. The last method is a field audit where a person from the IRS will come to your home. This is more common for small businesses or those that work out of their home. Upon receiving notification, you can contact your local Denver tax specialist to help you every step of the way through the audit.
- Audit Selection: The IRS explains there are three ways people are selected for an audit. First is through random selection. In this instance, it is randomly selected through a computer and occasionally is pulled by a statistical formula. The second way is through document matching. When tax forms do not match information reported on your Denver tax return, which can flag you to be audited. The last way is through related examinations. The IRS explains this is when returns have issues or transactions with other taxpayers (i.e. investors or business partners), who have returns selected for an audit.
- Keeping Records: Audits typically are sent for the previous year or two years past. This is the top amount of time of audits sent. However, the IRS may audit an individual from the last six years. It is most likely up to three at most, but the IRS will not go over six years. To be safe, it is best to keep your records. The IRS advises to keep records related to assets for the duration that you have that asset—then three years after. For payroll records, keep those documents for at least four years. Learn more on the IRS’ website.
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