It’s that time of year when many people in Colorado and all across the country will be filing their federal taxes. Although some people use the services of professional tax preparers to complete and file their returns, others choose to do it themselves. However, sometimes people make mistakes on their returns, which can cause a flag to be raised at the IRS and possibly lead to a tax audit.
Why are returns flagged?
Any number of reasons can cause a return to be flagged by the IRS. Most of the time, the preparer made an honest mistake or neglected to turn in a specific form. If the discrepancy is small, the return will likely not be flagged for a full-on audit. However, if there are significant discrepancies or the IRS suspects some sort of tax fraud, it will initiate an audit.
However, the good news is that IRS tax audits are relatively rare. Reports state that fewer than 1% of all tax returns are audited each year. The IRS is severely understaffed and does not have the personnel to knock on the door of everyone who makes a mistake. Instead, a person will likely receive a letter from the IRS explaining the discrepancy and offering ways to resolve the problem.
Being informed by the IRS that there is a problem with one’s tax return can cause a great deal of fright, stress and uncertainty for the individuals involved. However, it is important to remember not to panic and pay close attention to the IRS notice in order to resolve the issue quickly. Should the situation warrant a full tax audit by the IRS, the tax filer can work with an experienced tax law attorney in Colorado for assistance throughout the process.