HOUSTON, Feb. 10, 2011 /PRNewswire/ -- As we enter yet another tax season, many individual taxpayers and small business owners share fears about being audited by the IRS, often fueled by misconceptions concerning the audit process and a lack of information about how to avoid being selected for an audit. While audit regulations can be complicated, there are specific steps you can take to stay off the IRS's radar, according to Patrick Cox, CEO of TaxMasters.
According to Cox, "There is an increased chance of being audited by the IRS when taxpayers take aggressive deductions such as those for unreimbursed employee business expenses, large charitable deductions compared to income or large medical deductions compared to income. Unnecessary and untimely deductions for losses on a business or large losses claimed in one year compared to income from other sources can also raise red flags."
Cox added, "Other common deductions the IRS looks for are businesses with high mileage expenses, high meals and entertainment expenses and other large expenses compared to income for things like repairs, maintenance and supplies."
In fiscal year 2010, the IRS attempted to collect overdue tax liabilities from no fewer than 4.3 million taxpayers. With the effectiveness of aggressive IRS collections actions being called into question, the IRS may be forced to find additional revenue using other strategies. The IRS has increasingly used correspondence examinations, which are adjustments to a taxpayer's liability communicated by mail through an IRS notice, to effectively increase collections without all the drama and inefficiency of a field audit or desk audit.
So what's the lesson? If a taxpayer has any monsters hiding in his or her tax closet, the time to stop feeding that monster is now. The IRS may be slow to act, but when it does decide to pursue something, the agency does so with unrelenting vigor. Just ask Wesley Snipes, who wound up in prison years after failing to file only three tax returns.
IRS audits are usually conducted within 18 months of the filing date. However, the IRS can audit taxpayers up to three years after filing a return. Keeping organized expense sheets, paperwork and documentation each year is vital to successfully defending any claims.
According to Cox, president of the leading tax compliance and repayment services provider, the IRS does not randomly select returns to audit. If a taxpayer is being audited, the IRS believes that taxpayer owes more money. The best way to handle an IRS audit is to seek professional advice – especially when you have large deductions, such as office equipment, improvements to rental property and other big-ticket items, that span more than one tax year.
Cox's advice to his clients and all taxpayers: "Understand that any time the IRS amends a return or sends you a change notice, you have been audited. That means you have the right to challenge the IRS audit findings. If you have been hit with an unfair or inaccurate assessment because of an audit, get the help of a tax professional to build your case and refute the charges to get the money back that you deserve."
Information in this article is not intended to convey tax advice, recommendations or counseling and is not intended to form a client relationship under any circumstance.
About TaxMasters, Inc.
TaxMasters, Inc. (OTC Bulletin Board: TAXS) is the first publicly traded tax representation firm in the United States. Started by Patrick R. Cox in 2001, TaxMasters offers a full suite of compliance and repayment services to taxpayers across the country facing seemingly insurmountable tax problems and substantial federal tax debt. Tax services from TaxMasters include IRS consultations, tax return preparation, settlement analysis, and assistance with IRS automated collections, Revenue Officer involvement and collection due process.
Employing over 300 people, TaxMasters leverages the expertise of ex-IRS agents, enrolled agents, attorneys, CPAs, and seasoned consultants ready to counsel and assist the US taxpayer with their specific tax problems today. TaxMasters is not a CPA firm or a law firm.
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SOURCE TaxMasters, Inc.