An IRS audit is the thing most taxpayers are afraid of. But most of this fear comes from not knowing what an audit is all about, what it entails and most of all, what to do when you receive and audit notice. So if you know a few basic things about the whole matter, it takes a lot of fear out of it. Receiving an audit notice does not mean that you have committed an offence. In fact, audits can result in acceptance of the tax return without change or even a refund. If that be the case, how does the IRS choose who to audit in the first place?
There are several factors that govern who the IRS chooses to audit. Firstly, some tax returns are chosen for audit through the screening of a computer. An IRS computer compares data from a return to average numbers from other people’s tax returns in similar situations looking for variances. The data that is reviewed by the computer are things like charitable donations, interest income and variations from averages in your income bracket or zip code. If a major variance is detected, that tax return is chosen for audit.

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What if You Face the IRS in Court

If you have to face the IRS in court, would you know how to defend your case? Preparation is the key, but preparation depends on what your case would be about. Another important factor is whether you have a lawyer represent you or you choose to represent yourself. Taxpayers who choose a lawyer to represent them in cases of dispute with the IRS are successful 58% of the time whereas those who represent themselves are successful only 34% of the time. There are a slew of cases that taxpayers and the IRS most frequently contend over in court. Here are some of them and how you can deal with them.

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Tax submission deadline this year is April 17 (courtesy of Emancipation Day holiday in DC). You should be receiving the usual W2s and 1099s in the mail pretty soon. The IRS has issued some guidelines for you to follow to make it easier on yourself when tax season kicks off in full swing.

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In a recent report it has been revealed that IRS corporate auditors find an average of $9,354 in unpaid taxes owed by companies every hour they spent examining their tax returns. These are generally owed by the 14,000 or so of the largest companies in the United States in the 2009 fiscal year who pay about 86% of corporate income taxes.

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The new year has just begun and it is worth taking note of the various changes the IRS has in store for you. Being aware of these changes could help you avoid a hefty penalty or reduce your risk of being audited.

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