- March 8, 2020
- Posted by: asal
- Category: IRS Audits, IRS tax audits
IRS audits can cause both financial and emotional turmoil for someone’s life. However, before you vow never to answer your phone again, IRS tax audits do not happen all the time. But, that doesn’t mean that you’ll never come face to face with scary internal revenue service audits. Taxpayers are very capable of making simple mistakes that could lead to IRS tax audits. In this blog, we’ll break down what IRS audits are, how they can affect you, and how to avoid them.
What Are IRS Audits?
internal revenue service audits occur when the IRS launches a review of your accounts and financial information. Whether you’re a business owner or individual taxpayer, IRS tax audits can affect you. When the IRS starts an inspection, they do it to ensure you are reporting information correctly. They verify that tax information is correct based on current tax laws. Whenever you’re facing IRS tax audits, it’s helpful to have top tax defenders on your side. The experts at Platinum Tax Defenders have years of experience dealing with IRS audits. If you feel you might be at risk for IRS tax audits, contact Platinum Tax Defenders today.
Why Does The IRS Audit Taxpayers?
IRS audits occur for the IRS to minimize the difference between the money taxpayers owe and what the IRS receives. Sometimes, internal revenue service audits can be random. However, IRS tax audits typically happen with taxpayers who are guilty of suspicious activity.
What Are The Chances of IRS Audits?
According to CreditKarma.com, the IRS tax audits less than 1 percent of all tax returns filed in a fiscal year. In 2017, the IRS only audited 0.6% of all individual tax returns. Additionally, in that same year, it only reviewed 0.9% of corporate income tax returns. The following year, the IRS received 196 million tax returns and audited just 1 million. While IRS tax audits are not always frequent, it’s still essential that you prepare. Working with Platinum Tax Defenders early on in the tax season can help protect you from tax audits. Platinum Tax Defenders has experienced tax attorneys who can defend you in IRS tax audits. The top tax defenders’ CPAs can ensure you file taxes correctly, so you aren’t at risk for internal revenue service audits.
Will Internal Revenue Services Audits Affect Me?
There are some common mistakes taxpayers make that can lead to IRS tax audits. Here are some common reasons why internal revenue service audits happen.
- Math errors: It’s important to remember one thing—when filing taxes, don’t make mistakes. Do not accidentally write a five instead of an 8. Even the most straightforward math errors on tax forms can result in IRS tax audits. We understand that mistakes happen, but the IRS doesn’t.
- Not reporting income: IRS audits quickly happen when you don’t report part of your income. Even if your income is from a 1099 and not W-2, the IRS still receives the report. Not reporting income from 1099 can result in internal revenue service audits.
- Charitable donations: Too many philanthropic contributions can cause the IRS to raise an eyebrow. Most importantly, do not report false gifts.
- Reporting too many losses: If you’re self-employed, claiming too many losses can lead to IRS audits.
Additional Reasons For IRS tax Audits
There are other reasons why internal revenue service audits may occur, too. For instance, deducting too many business expenses can lead to Internal Revenue Service audits.
– To be eligible for a deduction, your purchases must be 1) ordinary and 2) necessary to your business.
You also have to be careful of IRS tax audits when claiming a home office deduction. The IRS narrowly defines what home office deductions are. Before you consider any tax deductions, check with the top tax defenders at Platinum. A top tax defender will be able to help you ensure you’re claiming the right deductions for you.
Lastly, the IRS can get suspicious when you’re using round numbers. When you’re making calculations, be precise. Round to the nearest dollar, not the nearest hundred. Experts at Platinum Tax Defenders can help to ensure your deductions and claims don’t lead to IRS audits.
Penalties for IRS tax Audits
If the IRS summons you for internal revenue service audits, you won’t likely escape without owing something. The IRS doesn’t spend resources on Internal Revenue Service audits if they don’t believe they’ll get something in return. During IRS audits, you may not only end up owing taxes. IRS audits can also result in you owing IRS audit penalties. The Internal Revenue Service audit penalties you may face depends on the individual internal revenue service audits. You may have the opportunity to lessen or remove your IRS audit penalties. However, negotiating with the IRS is always better when done with a top tax defender. Here are the different types of IRS audit penalties of which you should be aware.
Accuracy Related IRS Audit Penalties
If the Internal Revenue Service audits you because of inaccurate tax returns, you can face accuracy-related IRS audit penalties. The accuracy-related IRS penalties could mean paying 20 percent of the amount you underpaid. In some cases, the accuracy-related IRS audit penalties could have you paying 40 percent of what you underpaid.
What Types of Accuracy Related IRS Audit Penalties Exist?
There are several types of accuracy-related IRS audit penalties. Here are some that may result from internal revenue service audits.
- You are not making a reasonable attempt to abide by Federal tax code rules. This could include failing to file a tax return at all.
- Disregarding IRS rules or regulations
- Understating your taxes
- Misstating the value of property
- Overstating pension liabilities
- Understating a gift or estate
- Any understatements related to reportable transactions
Failure to File IRS Audit Penalties
Should you file late or pay late, there is a failure to file the IRS audit penalty. The penalty here is 5 percent of the unpaid tax. This IRS audit penalty accrues each month. The maximum the IRS will charge you is 25 percent. Paying late can result in IRS audit penalties of 0.5% of the taxes you owe each month. If you don’t pay up on taxes after the Internal Revenue Service audits you, there will be an IRS audit penalty on that as well. The IRS will assess a penalty of 0.5 percent for each month you do not pay the tax. If you pay within 21 days, you won’t receive an additional penalty.
Civil Fraud IRS Audit Penalties
If the Internal Revenue Service audits you and it results in civil fraud, you likely won’t go to jail. However, the IRS charges 75 percent in IRS audit penalties. This percentage gets applied to any tax underpayment that resulted in your fraudulent activity.
Fraudulent Failure to File IRS Audit Penalties
Failure to file IRS audit penalties can get you if you mistakenly think you didn’t need to file a tax return. However, in this case, you won’t be charged with fraudulent failure to file a tax return. Fraudulent failure to file a tax return is when you deliberately don’t register. If the IRS files criminal charges, you could face up to a year in jail.
Additionally, you may owe $25,000 in IRS audit penalties for each year you didn’t file. The statute of limitations for criminal charges is six years. For civil charges, there is no statute of limitations.
Willfully Failing to Pay Estimated Taxes
If you willfully fail to pay estimated taxes, it’s a misdemeanor, according to the IRS. Civil rather than criminal IRS audit penalties are applied here.
Reconsidering an Audit
You can sometimes avoid IRS audit penalties if you contest the result of the audit. However, you must request it before you pay any taxes, IRS audit penalties, or interest. Whenever you’re considering going up against the IRS, work with top tax defenders. Experienced top tax defenders can help make a deal with the IRS.
How Do I Contest IRS Audit Penalties?
First, before contesting IRS audit penalties, work with top tax defenders. Experienced top tax defenders can help you negotiate a deal with the IRS. Here are some other examples of what you’ll need to contest IRS audit penalties.
- A statement explaining your audit reconsideration
- Form 1099, canceled checks, bank statements, and any new documentation
- Copies of previously supplied documents
- Records of your correspondence with the IRS
The IRS may not grant you your request and remove your IRS audit penalties. However, in some cases, they will oblige. Working with top tax defenders can guarantee you have a good chance at the best outcome.
Facing Internal Revenue Service Audits? Call Platinum Tax Defenders
If you’re worried you may be facing an IRS audit, call the experts at Platinum Tax Defenders. Our team of top tax defenders can be the defense you need against the IRS. We can help you navigate internal revenue service audits, and also IRS audit penalties. For inquiries, visit www.platinumtaxdefenders.com.