Why the IRS May Contact You..................!

Why the IRS May Contact You.....

Taxpayers should understand that an audit in no way implies suspicion of criminal activity. Tax returns are complicated documents carrying financial data that must be evaluated to confirm accuracy.

The audit process is known as an examination and does not imply that you have intentionally made an error. In fact, the IRS contacts individuals for a variety of reasons.

Taxpayers are chosen through a “random selection and computer screening” process, according to the IRS, that is based on a statistical formula. The IRS compares tax returns against “norms” for similar returns. If your return doesn’t follow the “norms” you may be chosen for an audit.

If your tax filing includes transactions with other taxpayers, such as business partners or investors, and they were audited, you also may be audited.

Some returns are chosen based on other factors like income reported or unusual deductions.

Other reasons you may be audited:

  • Conflicting third-party reports regarding income on 1099s or W-2s
  • Home office deductions
  • Rental losses
  • Business use of a vehicle
  • Hobby-related deductions (also known as hobby losses)
  • Foreign currency transactions or bank accounts

Three Types of Audits

Depending on the level of severity, there are three types of audits. Most audits are nothing serious, and more than three-quarters of audits are completed through the mail, according to news reports.

  1. Correspondence (Mail) Audit - Routine errors from incorrect math or missing paperwork are often handled through correspondence.
  2. Office Examination Audit - An office examination is scheduled at a local IRS branch where they will generally try to find out if you reported all of your income and that your deductions are legitimate.
  3. Field Audit - A field audit is the most extensive of the three. An IRS agent will pay a visit to your home, business, or accountant’s office to examine records and files in order to confirm that your tax return information is correct.

Location: Connecticut, USA

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