IRS selects around 1.5 million taxpayers in a year and ‘invites’ those to explain inconsistencies in their tax return. How does it select these taxpayers out of 135 million returns filed every year? Well most of the times it applies some criteria to pick a ‘deserving’ taxpayer. Here are some important ones.
1. Mathematical corrections – Usually IRS computers generate these audits. If you have made mistakes while filing your tax return, these computers are most likely to catch you. These are silly mathematical mistakes which you would have avoided easily. Some of these mistakes are – entering incorrect spelling of your name on your tax return, entering incorrect social security number, entering the incorrect status, making a wrong calculations about earned income credit and improper assessment of estimated tax.
Usually IRS assumes that your details are correct and makes the calculation of your tax figures based on them. If there is any additional tax liability, they will add interest and penalties to it and you will be sent a notice demanding such money.
You will have a period of 30 days to contact IRS and schedule an appointment to prove that your original data is correct. Continue reading ‘How You Enter the Cage of Tax Audit’ »