When a letter from the IRS shows up, it is only average for someone to be slightly nervous. The IRS has garnered a negative reputation due to the punitive nature of an audit the closer examination of an individual or business’s expenses. While audits only impact roughly 0.5% of all tax returns, the experience can feel harrowing without support from a professional.
Mark Hauser is based in Cincinnati, offering financial services in several fields. With a rapidly growing business and the trust of his clients, Hauser took time to share some key insights to overcome an IRS tax audit while preparing for the experience in general.
So You’ve Received An Audit Letter
The Internal Revenue Service considers an audit as the careful review and examination of financial information and accounts related to an organization or individual. The audit ensures that these accounts are accurately reported and compliant with tax laws.
Just because an individual has received an IRS letter in the mail doesn’t mean they have done anything wrong. Audits can be instigated at random. With that being said, there are certain risks that individuals and businesses take that can expose them to potential audits.
Risk Factors For an IRS Audit
There are several reasons for the IRS to contact an individual or business to perform an audit. The notice is typically sent out by mail, in which case the recipient has up to 30 days to respond to the audit request. During this time frame, taxpayers should work to find a professional to oversee the audit, and this is where people like Mark Hauser step into the equation.
Hauser notes that there are a few reasons why an audit is being performed, pointing to the most common risk factors:
- Failed to Report Income – When there is a gap between taxes paid and taxes owed, the Internal Revenue Service wants to find out why. Failure to report income can lead to an audit within short order.
- Too Many Losses – If a self-employed taxpayer incurs too many Schedule C Losses, the IRS may get involved to determine how the business remains in operation.
- More significant Charity Donations – Sudden charity donations that are out of line with history may trigger an IRS audit, depending on the tax situation of the individual in question.
No matter what has caused the IRS to come knocking on your door, it is essential to work with the assistance of a professional by your side.
