Can you believe that the average American citizen will pay over $525,000 in taxes over the course of their life?
Whether you run a business or file as an individual each year, it’s important to get the entire process right. If you forget something or try to fudge the numbers, then it’s only a matter of time before the IRS comes knocking. At that point, you could be dealing with a tax audit.
Are you unsure what a tax audit entails? Keep reading to learn everything you need to know about a tax audit.
What Is a Tax Audit?
The simplest way to categorize a tax audit is by thinking of it as the IRS wanting to take another look at your taxes. Their goal is to double-check the information and ensure everything has been filled out correctly.
If they discover one or more errors, then this could trigger a wider and more in-depth audit. Most people and businesses fear this possibility because it can take years of money and work to complete.
The good news is that there are trained and reliable professionals who can help you with any tax audits.
What Can Cause Tax Audits?
It’s an unfortunate fact that multiple aspects of your taxes can lead to a tax audit. One of the most common issues is when a business or individual doesn’t report all of their taxable income. This is one inconsistency but there could be many others that pertain to different aspects of the tax season.
If you earn a significant amount of money, then there’s a higher chance of being audited. This is a classic case of frying bigger fish rather than the minnows. Aside from making a significant amount of money, you could also be flagged if you’ve made a huge charitable donation and deducted it from your taxes.
While charitable donations are deductible, the IRS sometimes suspects individuals of trying to commit tax fraud by deducting income they plan on keeping.
Do you have a foreign bank account? As most people know, rich people are notorious for having Swiss bank accounts in which they try to avoid any and all taxes. This is something the IRS has been cracking down on.
If you run a business in the restaurant industry or something similar, you could be targeted due to the sheer amount of small cash exchanges.
Are You Ready to Handle a Tax Audit?
Now that you’ve learned everything you need to know about a tax audit, you don’t have to worry. If you ever get audited, you’ll know what to do. As long as you pay your taxes according to the rules and regulations, you’ll reduce your chances of an audit.
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