Should you worry about facing a tax audit?

Should you worry about facing a tax audit?

On Behalf of | Jul 23, 2021 | Tax Law

Just the word “taxes” is enough to make nearly any Colorado resident groan. When it comes to a tax audit, that groan could turn into headbanging frustration as the individual tries to determine why the IRS is taking another look at his or her tax returns and what can be done about it. Fortunately, audits are not as common as many individuals believe, but it still pays to be prepared.

It does not do much good to just sit and wonder whether an audit will take place, especially if a taxpayer or business owner is filing his or her tax-related information correctly. While the chance does exist that an audit could occur for someone who did file correctly, it is easy to defend against any claims by having the correct documents and records on hand for quick evidence. After all, the IRS is not immune to making mistakes.

Even if a taxpayer files correctly and provides accurate information, the IRS may choose to review a tax return more in-depth if any of the following reasons apply:

  • If a person owns a business
  • If a taxpayer makes more than $200,000 in a year
  • If a home office is claimed as a deduction
  • If a foreign bank account is not reported
  • If a higher-than-average amount of itemized deductions are claimed

Of course, the IRS may have other reasons to look into a Colorado resident’s taxes a bit more closely, but a tax audit does not have to be a fearsome thing. Often, taxpayers can provide the IRS with a bit more information to clarify some misinformation or to support the already provided information. In cases where audits are a bit more complex or could relate to possible criminal charges, gaining outside help from legal professionals is wise.